Do You Have to Claim a Sold Car on Your Tax Return?
Is it time to sell your car, truck or SUV? We know that anytime you buy or sell a car there are a lot of questions that revolve around finances and include terms like – sales tax, tax return and IRS. Birmingham-area drivers who plan to sell their car at The Car Depot may have asked – do you have to claim a sold car on your tax return and report it to the IRS? We are here to help answer all of your automotive sales questions at The Car Depot!
Do Profits From Car Sales Get Reported on Your Tax Return?
When you sell your car, you will need to ask yourself – did I make money? When you sell your vehicle and do not make a profit – you do not need to pay any additional taxes or include the transaction on your annual tax return. An automotive sale that results in a profit for the seller is considered capital gain by the IRS and will need to be included in your tax return and will incur additional taxes.
Pretty plain and simple, right? To report or not report is a simple answer – but determining if you made a profit or not may not be so simple. When you own a car, truck or SUV for a few years, it may be difficult to recall how much you paid when, where and to who – and you may need to prove to the IRS that you sold your car at a profit or a loss. Here are a few quick tips that can help you at tax time.
- Keep any and all documents from when you purchased your car, truck or SUV.
- Keep any and all documents from when you sold your car, truck or SUV.
- Keep any and all documents for modifications and customizations to your car, truck or SUV. Features like new wheels, a lift kit, truck topper or stereo system can increase the value of your car and are part of the total investment – which factors into the profits or loss.
- Keep any and all documents for several years after the sale to avoid any complications.
How To Report a Profit When You Sell Your Car
Did you sell your car, truck or SUV and make a few bucks? First – you will need to include the profits on your tax return – but you will also need to report a capital gain. To file a capital gain, you will need IRS Form 1040, Schedule D and will need to include the appropriate documents. When you own the vehicle for less than a year prior to the sale, profits must be reported as short-term capital gains.
READ MORE: Should You Sell or Trade Your Used Car?
Do you have to claim a sold car on your tax return? This is a common question we get from car sellers at The Car Depot and we hope that this quick review will help. Contact The Car Depot today and learn more about how to sell your car fast for cash!