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We generally think of taxes being owed on earned income and investments, not the sale of a car. But with recent inflation and things like cars going up so much in cost, some cars are actually selling at a profit…
You can receive income in the form of money, property, or services. The IRS says that all income that is taxable must be reported on your tax return and is subject to potential tax.
Cars would fit into the category of income from property sales.
Very rarely can a car owner sell a used car for more than he/she paid for it originally. However, the changes in our economy recently have had used cars sell for more than they ever have, creating a possible increase in value of autos, which can result in an actual gain upon sale. This gain would then be reportable as income just like the gain of stock.
If the car has a gain and was owned for more than one year, the gains would go as capital gain income, subject to favorable tax treatment. Those sold in less than one year from the purchase date would be subject to ordinary income tax rates.
Contact us if you have questions as it pertains to your specific situation…we’re happy to help!