If I trade in a vehicle with positive equity and get a check cut back -- taxable?
06-03-2013, 11:23 AM
#1
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If I trade in a vehicle with positive equity and get a check cut back -- taxable? If I trade in a vehicle and pull out my positive equity to finance instead, is that considered taxable income? I'm hearing a few different answers and was hoping someone on here had first hand experience.
Thank you
Thank you
06-03-2013, 11:35 AM
#2
You've already paid tax on the vehicle on the original purchase price.
1. Buy car for 20k
2. Pay taxes on said car.
3. Sell car (whatever method)
4. Taxed again?!? I think not.
The new owner gets to pay the tax on the vehicle when he/she goes through the DMV/Title dance. I just sold my CTS-V in a private sale, and that's how it went.
1. Buy car for 20k
2. Pay taxes on said car.
3. Sell car (whatever method)
4. Taxed again?!? I think not.
The new owner gets to pay the tax on the vehicle when he/she goes through the DMV/Title dance. I just sold my CTS-V in a private sale, and that's how it went.
Last edited by white2001formula; 06-03-2013 at 11:37 AM. Reason: Added information
06-03-2013, 11:37 AM
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Only if you also pay income tax on a car if you sell it on craigslist. You may be confusing equity with capital gains. Not applicable unless you depreciated the vehicle for business use or something on previous taxes. I'm sure the IRS would thank you though.
06-03-2013, 11:38 AM
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Lets just say using easy numbers. A car is worth $30k, and I wanted a $20k check cut back and put that $20k into financing instead. Is that considered taxable income.
06-03-2013, 01:51 PM
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Time held also comes into play. IRS Schedule D.
http://www.irs.gov/pub/irs-pdf/f1040sd.pdf
Looks like I was wrong about saying only if you depreciated it. At any rate, your cost basis for if you made a gain is the original purchase price, plus any improvements you made to it. It is not adjusted by "market value", i.e. if you sold a car with market value of $15k for $20k BUT you originally purchased it for $30k then you do not owe on your gain over what it was "worth". If you bought for $20k and put a $5k engine in it, then sold for $26k, you owe income tax on $1000, not $6k.
As far as I'm concerned, it's one of those self regulated tax laws just like we have in SC where we're supposed to report online purchases from Amazon to the state come tax time so we can be taxed on them. Amazon reports the amount to us but not to the state so feh.
http://www.irs.gov/pub/irs-pdf/f1040sd.pdf
Looks like I was wrong about saying only if you depreciated it. At any rate, your cost basis for if you made a gain is the original purchase price, plus any improvements you made to it. It is not adjusted by "market value", i.e. if you sold a car with market value of $15k for $20k BUT you originally purchased it for $30k then you do not owe on your gain over what it was "worth". If you bought for $20k and put a $5k engine in it, then sold for $26k, you owe income tax on $1000, not $6k.
As far as I'm concerned, it's one of those self regulated tax laws just like we have in SC where we're supposed to report online purchases from Amazon to the state come tax time so we can be taxed on them. Amazon reports the amount to us but not to the state so feh.
