Do You Have to Pay Taxes When You Sell Your Car?
Are you prepared to sell your car? Maybe you are ready for an automotive upgrade or want to use the cash for another reason – either way The Car Depot is here to help. We want to buy your car and will provide a competitive instant cash offer for your car, truck or SUV. Potential car sellers who choose The Car Depot in Birmingham, AL want to know – do you have to pay taxes when you sell your car? Let’s take a closer look.
What Do You Need to Know About Taxes When You Sell Your Car?
Are you worried about having to pay additional taxes when you sell your used car, truck or SUV? No need to worry. In most cases – you do not have to pay any taxes when you sell your car to a private seller or a company like The Car Depot. Most car sales involve a vehicle that you bought new and are selling used, and in this case, you will typically not generate income that needs to be taxed. To summarize, when you sell your car for less than what you invested in it – the sales price plus the cost of upgrades and improvements – you will not have to pay any taxes on the money generated from the sale of your vehicle.
There are exceptions to the rule. Birmingham-area drivers who love classic cars may end up selling their car, truck or SUV for a profit. In this case, you would pay what is called a capital gains tax – which is applied when you sell a vehicle for more than you invested in it. The amount of capital gains tax will vary based on a number of factors that include your income from additional sources. This tax does not have to be paid until you file your annual taxes.
What Tax Documents Do You Need When You Sell Your Car?
When it is tax time, you will need to show your work – just like your 5th-grade math test in Mr. Wilson’s class. Remember to keep documentation from when you purchased your car, when you sold your car and any upgrades you have paid for. These documents will establish if there are any profits made on the sale of your vehicle and if you need to pay a capital gains tax. Capital gains must be reported with an IRS Form 1040.
READ MORE: Should You Sell or Trade Your Used Car?
Are you planning to sell your car? You may want to know – do I have to pay taxes when I sell my car? We hope this quick breakdown provided by The Car Depot has helped answer your questions. Contact The Car Depot team for more information on selling your used car for the best price in Birmingham, AL!