silver/red

The only way it would be taxable to you is if it is a capital gain like in the example above. The buyer pays sales tax and that is it. Almost always when selling a car it is a loss and if you are not in the business of selling cars (or depreciating it as a business expense) it is not reported or deducted.

silver/red

The only income tax that would be incurred on the car other than a capital gain would be if you depreciated your car on your taxes in previous years for a business or as an employee business expense and then sold it for higher than your adjusted basis.

Murche

iTrader: (1)

I think we are getting a couple of the tax laws mixed up here. The amount tracked by banks is anything over $6000, and just to prevent money laundering. The taxable income limits are out of the "gift to minors act" allowing $10000 to be given to another individual without a tax burden. The amount is actually $11000 this year not $10000. If I took $20K in cash and deposited in the bank I wouldn't have any tax burden other than future interest, as cash has no trail. I could have pulled it out of my mattress and finally deposited it to the bank. If Billy Bob wrote me a check for $20K and I deposited it in the bank. I'd better have a copy of the bill of sale to prove it wasn't income. I doubt it would ever be an issue. I notice a majority of the posts are from Cali. I'm new to the state myself and don't know what the state requirements are, but I have bought and sold many cars as a private collector and have never paid income tax on any of those vehicles.

TITAN

iTrader: (1)

Ding Ding Ding.....I think we have a winner....

primer84z

iTrader: (7)

Good info to know so others in that situation dont get freaked out about depositing large amounts of money in their account. My father-in-law (CPA) also concurs with it not being taxable unless its captial gain (selling for profit).

Black02LS1

iTrader: (5)

Im not sure how much it is on $10k but i remember that for $15k it was about $900 or so for state sales tax, maybe closer to $1k.

383lt1impala

iTrader: (33)

we always check the gift box.

cruiSSin LS1

iTrader: (2)

this is a good thread...cuz i have always wondered this...

ROCNDAV

iTrader: (100)

If you sold the car, it is still an income. Technically the IRS wants to tax you on all income, whether its little Jimmy's Barney Blanket in last weeks yard sale, your record/CD collection, $100K inheritance from grandmas death or Game winnings.

I know someone that had to pay double taxes on game/prize winnings.
Lets say you won $100K in a lottery (inheritance, or what ever). Right off the bat, you get $30K taken away, leaving you with $70K. Everybody thinks that they are done here. nope. At tax time, lets say you make $50K a year salary, you get taxed for the $100K (not 70K) + your 50K. So lets say you claim 0 on your W4, and have the max (lets say 30%) taken out, so you've already had $15K taken out via your weekly paychecks.

Mr Tax man (once again, not talking about write offs or any deductions) says you need to pay $45K in taxes this year, your W2 shows you've already paid $15K, so you now owe $30K in taxes. Hopefully you haven't blown your winnings (like buying a Z06 with the $70K). You pay 30k, leaving you with 40K. Out of the $100K that you "won", you have only 40K that truly comes to you.

But most people don't know this and blow the whole 70, and end up being in a worse position than they were before they got that income.

jims73z

iTrader: (1)

You don't pay taxes on the sale
The buyer pays sales tax on purchase.

Ask the bank

EkS

Okay people you're getting confused on the SALES TAX that the BUYER pays, and the INCOME TAX that the seller pays on the sale.

I am talking about the INCOME tax on the sale.

silver/red

EKS, There is no INCOME tax on selling a car unless the specific circumstances outlined in my above post. I am positive about this and the buyer would pay the necessary SALES tax. Your question has been answered, some of these responses from other people are just flat out wrong and why many people should have a CPA prepare their 1040's.

Okay, in response to the post above it would be possible for someone to gift the 100k to a beneficiary tax free as long as they have not exceeded their lifetime GST exemption around 1 mil or so, this assumes that on their death they don't have to file an estate tax return. In that situation the estate would have to pay 55% tax on the assets (estate returns are only filed for people with over 2 million in assets).

primer84z

iTrader: (7)

ROCNDAV, a vehicle sale between two individuals and not businesses, is not taxable income unless you are making a profit (capital gain). It has been said numerous times in this thread and the information is readily available on the internet or your local H&R Block, etc. Now I can see where one could get in trouble by not putting the full sale value on the DMV forms when they register it, then when they sell it to an HONEST person who puts the full amount they paid you for it, it will appear that you have made a profit when you look at the title and paper trail. So if you have been scamming the sales tax (marking gift, not putting the full sale amount on the title, etc) and you were to ever get audited, your probably going to have to pay income tax because the paperwork will show a profit had been made on that vehicle sale...

Moral of the story is, dont be a scumbag who scams out of sales tax, it might come back and bite you in the *** when/if you sell the vehicle, causing you to pay income tax.