Do I have to pay taxes when selling my junk car?
There are some things in life that can really hang over our heads. If you’ve ever had an unpaid debt that’s just nagging at you, you know what we’re talking about. A home repair that you’ve been putting off, a to-do list that you’ve been ignoring, or a long list of emails that you need to respond to: all of them are in this same category. And, there’s one more thing you can add to this list. You guessed it: dealing with a junk car.
Once you finally get around to selling your clunker, it doesn’t necessarily have to be the huge ordeal you might have imagined. Sure, selling your junker to a private buyer can be a real pain. If you list your car with an online classifieds website, you’ll likely end up with your email inbox flooded with spam messages from fake email address, and you may even receive a slew of text messages from scammers. If, on the other hand, you opt to work with a company like Junk Car Traders, selling your junk car can be stress free: no hassles or gimmicks, just a smooth, easy process. They make selling your car a fast and easy process, even in states like Vermont.
There’s one question left on your mind, though. What about taxes? Do you have to pay a tax when selling your junk car? Are you taxed on the income that you receive? Do you need to report it at the end of the year?
These are legitimate questions. Just when you thought that you were finally done with the headache of dealing with your junk car, now you’ve got to worry about a possible tax liability. Don’t stress, though: we’ve got the answers you’ve been looking for. Read on to learn more.
Does the sale of my junk car count as taxable income?
To put it in layman’s terms, the IRS considers your car to be a “capital asset.” If you sell your vehicle for more than its purchase price, then you’ll owe taxes on the “capital gain” that you receive as a result. If you sell it for less than you paid for it, it’s considered a loss. In that case, you won’t need to pay taxes on it.
How do I determine if the sale of my clunker is a capital gain?
Figuring out whether your car sale was profitable is easy. Here’s all you have to do:
- Find the original price you paid for the car. If you still have the bill of sale, it’ll be listed there.
- Be sure to subtract any tax you paid from the purchase price.
- Deduct the cost of any major improvements made on the vehicle. Routine maintenance doesn’t count; things like a specialty audio system do.
- Now, subtract the sale price of the car from the number arrived at above. If you end up with a positive number, this means there’s a positive difference between the purchase and sale price of the car. So, you’ll owe no tax. If you sold the car for more than the total cost calculated in steps 1-3, then you’ll owe tax on that amount. You’ll report it on Schedule D of Form 1040 on your tax return.
Be sure you’re getting a fair price when you go to sell your junk car. Work with a reputable company that pays top dollar: call Junk Car Traders at 855-959-1325 for a free, no obligation quote!