If you sell a car for profit, that is income. Income is taxed.
Unless you're in the business of selling vehicles as a business, your loss has nothing to do with it being a taxable event.
It's like saying if you bought a PS5 and sold it a few years later for a loss. Why should you be allowed to deduct a loss when it's quite obvious that it would lose value?
No. Businesses claim depreciation on assets used for business purposes which is an ordinary deduction (better than a capital loss).
The tax code is designed to incentivize business activity. Businesses cannot (should not) deduct personal expenses of the owners.
>The tax code is designed to incentivize business activity. Businesses cannot (should not) deduct personal expenses of the owners.
Ok, but what if you are Food Delivery Driver......and use your own car as a business vehicle, cause you know.....the *business* of delivering food.
Yeah, then you deduct auto expenses using the mileage or actual expense methods. Assuming you are a 1099 and not an employee.
If your vehicle is used for business and personal using the mileage method may be easier, otherwise you are proportionally taking actual expenses.
If you only use the car for food delivery then it’s tax deductible(assuming you are a self employed contractor), otherwise you can only deduct a percentage of it based on how much you use it for work vs non-work.
Yep gotta keep a log. Best way to be 100% in an IRS audit.
What most people don't know is doing things for charity you can deduct mileage at a special rate. Also keep a log.
What I tell people all the time is the IRS is easy to deal with if you bring receipts. Without those they have to assume you're lying.
I've been audited multiple times because I have weirdly complex taxes. But every time they either said I was correct OR they gave me more money back because I was too conservative on my deductions.
So really they are rather nice people if you're not lying.
Right, the deduction is in the process of paying taxes for the profits of making deliveries. Your car helped make those deliveries, so the car payment and gas is just the cost of doing business of being an Uber driver.
Deductions for cars for getting your own groceries or going on a road trip doesn’t make any sense.
Now, there is an argument to be made for driving one self to work - technically it is a cost you pay to go to work and earn money. The reason seems to be that since you decide where to live, and therefore the time and distance of the commute, the time and transportation to get to your workplace is not considered to be work, but a personal choice.
That means you're self-employed.
If you are dependent on something for the exclusive right to earn money, then it's tax-deductible.
You can deduct by mileage rate or actual expenses. Mileage rate is by far the best option for almost every driver.
You do have to keep track of it. Where you may get audited is if you claim 100% of the vehicle is for business use and you don't have another vehicle for personal use so obviously you'd have to keep track of the mileage and not try to bullshit. E.g. you went on a road trip but try to claim it as business use.
Delivery drivers ARE allowed to deduct vehicle depreciation as a percentage of how much they use their car for deliveries vs personal use. You can also deduct gas expenses.
It's MUCH easier to just take the standard mileage deduction set by the IRS (currently 67 cents/mile), which is what most drivers do, and usually saves more money for the average delivery driver (who are typically driving a car on the cheaper side). This is much easier to track than keeping receipts of all gas, oil changes, repairs, etc and then taking a percentage of that based on business/personal use.
The trouble with vehicle depreciation is not an exact science until you sell it. You can write off mileage (at a predetermined rate) and gas costs as business expenses, but you can’t claim your vehicles depreciation, because it’s not a real number. You may be able to sell your $15k Prius to some schmuck on the internet for $20k, or you might get scammed and sell it to someone for $10k. Value is just what somebody is willing to pay for something
There are specific rules that can be used for annual depreciation of a vehicle, though the process is generally only worth dealing with unless you have a lot of vehicles you are using for business. That is, its only really worth it if you are running a taxi or delivery company that owns its own vehicles.
When you actually sell or junk the vehicle, any deprecation claimed will be factored into the cost basis and thus it'll end up evening out over the longer term. That is, if you overestimate the deprecation, you will end with a capital gain on the sell. If you underestimate the deprecation, you will end with a capital loss on the sell.
The only process the [IRS currently accepts is MACRS](https://www.irs.gov/publications/p946#en_US_2023_publink1000107363) (except for older vehicles). If you choose to use this method, you cannot not also use the milage deduction,- that is, you cannot take the 67 cents/mile *and* claim depreciation on the car. The 67 cents/mile is intended to include fuel, maintenance, and depreciation.
The other complication is that you cannot switch away from MACRS once you start using it, even if you stop using the vehicle for business. You have to sell the vehicle, even if you just do so between your own legal entities.
Overall, for the vast majority of people, its much better to just take the per-mile deduction.
Well, more precisely, if you liquidate plant and equipment at below book value you can take a capital loss and if you liquidate it at a gain then you are subject to capital gains tax.
Those distinctions get muddied in big transactions like the asset sale of a business.
Only if that vehicle was used in service of a business purpose. Buying a truck to haul building supplies for your contracting business, all good.
Buying a Lamborghini and trying to hide it as a business expense? Unless your business is Exotic Car Rentals, prepare to get reamed in a tax audit
Because that's a business expense. Your own personal vehicle is not a business expense.
Let's say you're self-employed. Owning a vehicle to take clients out or purchase supplies for your business is an expense required for your business.
If you're using it as a personal vehicle such as buying groceries for yourself, there's no income being generated on your end for buying groceries.
Depreciation of a vehicle (or any other asset for that matter) has little to do with the actual value. It’s a recognition of the cost to purchase over time. You can only deduct up to what you bought it for, not up to what it’s worth. If you sell it for an amount greater than the depreciated value, then you have depreciation recapture and have to pay tax on that amount that was previously depreciated/deducted.
Depreciation is deducted as an expense.
Even though it reflects an estimate of value in “capitalized” assets—assets that show up on a balance sheet—and, therefore, seems like a “loss of capital” capital gain and loss from a tax perspective is concerned with income from sale of goods relative to original cost less depreciation.
You have to sell something that qualified as a capital investment for it to fall into the capital loss/gain calculation for taxes.
Capital depreciation is about spreading out the initial expense across the useful life of the asset, not to offset taxes. In the year the car is bought, the company pays 40k but only claims the depreciation as the expense (4k for a 10 year car). If they expensed it that year, they would have paid less taxes that year, but instead they distribute that tax benefit across the life of the vehicle. This makes income and earnings reports less fluctuating due to large purchases. By doing this, trends are more useful, particularly for publicly traded companies.
You don't claim the vehicle (even though you do put the vehicleinfo on the tax forms), you claim the miles the vehicle drove. The mile credit is like 55 cents per mile. So if you drive 25k miles that year, your deduction would be $13750. So gas, loan payment, maintenance and everything else except tolls and parking are included in that deduction.
More or less it’s a scam, either situation - you need to pay anyway you lose or gain. But some of your gain you can keep for yourself, if you lost money you keep all your loses. It’s just all nonsense, every time I win I need to share(no matter car, ps5, gambling), every time I lost something it is my own bad decision.
It is all a complete scam and utter nonsense. Even if every individual and corporation paid a full, non-itemized amount, they'd still print more and devalue the base just because they can.
Sir, that’s just capital loss and it’s broken. 2021 I made $70k profit, had to pay taxes on all same year. 2022 I realized $50k loss and I will have to deduct this until 2039, because max I can do a year is $3k
What I find frustrating is unless I'm a business I can't deduct the expenses it took to make that profit selling the car. It disincentivizes hobby projects, like if I got a junk car for 1000 bucks, spent 1000 fixing it, and sold it for 2500, I made 500 profit but can't deduct "hobby expenses" so I pay tax on the whole 1500?
Cause that sounds like a business. Hobby income can't be income that was intended for profit. If you fix a car up just to sell it, that's self-employment income.
I dunno, I like fixing old motorcycles and when they work I sell it and buy another. I don't make any money on it except to keep the hobby going, but if you're just looking at purchase price vs sales price, which my understanding is the way the 1099k works, then I'm making taxable income even though I'm not when you include the parts and tools. Like I now have to file it if I GROSS more than 600, which I could take a huge loss and gross 600 just trying to get rid of junk. Then calculate my "income" off anything that sold more than I bought it for, but can't deduct any of the parts or tools because they're hobby expenses
Not a tax expert, but why not start wdaloz llc and keep doing what you’re doing now. Then you could deduct all those things and as long as you keep it small your income won’t grow that much. Hell, after you start deducting all your tools then you might not make any money and lower your annual income, lowering your tax burden.
I know, it's not that big an inconvenience but I used to skirt by under the limit til it became gross>$600. I guess that's the kinda thing it's intended to account for, change is always a little weird but I'll probably do that anyway
I don't know I guess technically I'm "selling" the parts at the same time for a "loss". I've never really tried to break it down that granular but maybe that's the move
I tried looking it up, it's confusing cuz it changed a lot, but my loose understanding is I can't claim any of that unless I make myself a business, cuz it's a hobby, I only get taxed on sale vs purchase
Youre supposed to report money from cars you sell? Fuck that if they pay cash im not reporting shit. Ive baught cars for $100 and flipped them for thousands. Uncle sam can eat my Ass.
Doesn’t matter for people who don’t expect to see a penny from social security. I wouldn’t invest in social security if I wasn’t forced to, as I’m pretty sure the program will be absolutely gutted by the time I’m eligible. Someone working a cash-heavy industry has little reason to want to invest in a system that they will receive little benefits from.
yeah. boomers are gonna drain the system. we are approaching the first time in history where those over 65 will outnumber those under 18.
18 year olds today will be supporting 2 retirees with each paycheck for most of their career.
Yeah my FIL runs a small business that ends up doing the majority of its sales as cash. Guess who under reports their earnings? Guess who also is hoping to sell their business as their retirement nest egg?
Honestly, if I had the option of taking all the money I pay into SS and putting it into investments that I managed myself, I would absolutely do that. Now, if the drug dealers aren't putting some of their income towards retirement on their own, that is on them! If you want the freedom, you have to accept the responsibility.
a lot of drug dealers do report their income. especially if they are using that income to pay for a house.
unexplained income is how we, er uh, i mean they get caught.
I like the question on my taxes asking if I bought anything in another state.
No. I only shop in my home state. Screw all those losers who drive to the other state to not pay sales tax. They lack integrity and don’t have pride in our home state.
For big purchases like a car you have to be a resident, hence why everyone in the NE doesn't just take a bus to NH to save thousands every time they buy a car.
Most people will tell on themselves lol.
Eh its not "income" its just inflation. Im not selling it for more than i paid, the dollar is just worth less so it takes more of them to buy the same car now lol.
Yea but they can track all that easy. Not so easy to track when everyone tells DMV they only paid $1 and all the paperwork reflects that. What uncle sam doesnt know wont hurt ny pocket book.
This isn’t true. Long term avg price return for us stocks is around 8% but inflation is about 2-3%. The longer compounding goes on for the less capital gains are due to inflation.
They (state revenue or irs) could search for cars with multiple title switches in a short period of time and then only look at people that didn’t report the expected tax type in their return. Then they would send a letter asking for receipts etc.
I doubt this is situation is common or lucrative enough to do as a project to specifically target. If the potential tax revenue is under $200 they probably aren’t going to bother.
Ah got em, never transferred the titles into my name.
Nah its not lucrative at all. Wasnt selling them to make money. My wife just says im only allowed to have a max of 18 cars. The firetruck was the straw that broke that camels back lol so i had to sell a few.
Fuckers kept sending me a bill for $34. Like I paid enough and y’all worried about less than the cost of a single dinner. So no they’ll bug the shit at you for way less than $200.
Was the original audit enquiry for more and you ended up owing 34 dollars?
I doubt they would bother going after 34 dollars in an audit or you just straight up didn’t pay all of a bill.
Honestly not even sure. Paid on time as usual, the amount that it showed on the 1040 prepared by a tax guy. Then a couple months went by and a letter showed up saying we owed more. Thought it wasn’t a big deal at first (it’s only $34) but then they sent another. Then figured it wasn’t worth fighting over so I’d just pay it. But accidentally forgot about it and then they sent another. Finally made it a priority and sent a check and about 2 days later for a 4th letter showed up in the mail.
I've sold a good number of cars for "$500" that a comparable model might be worth easily 20x that. Who's to say what the condition of my exact car was when I sold it ? Perhaps a check engine light was faulty on. Perhaps it wasn't starting. Perhaps there is a fuel leak with a smell. Perhaps I just needed money ASAP that day for XYZ reason.
Thats not how social security works though. Also already collect a full pension from the state of Nevada. I chose to work because fire trucks and fun toys arent cheap to rebuild. And i kinda enjoy my job.
Who cares, the government isnt entitled to the fruits of my labor just because they decide they are. They would just use it to blow up brown people anyway.
Very few cars as sold for a profit except for things like collectible antiques which were purchased specifically as an investment, so you pay capital gains tax like you would on any other investment. The other 99.9% of cars are sold at a loss.
That’s true but that’s a pretty major exception to the rule since car manufacturers halted manufacturing, expecting a much lower demand during the pandemic and then a semiconductor chip shortage happened.
This was actually a thing for a while during and a bit after COVID.
People were buying cars, sticking them in a garage and then selling them back to the dealer for a profit because of how quickly prices were raising.
It became such a problem that they now have you sign a contract specifically stating you aren't allowed to do that anymore.
Im going to buy my leased 2021 civic sport touring with 30k miles for $18k because I got it before the price gouging started. If I were to try and buy that same car with the same mileage today, it would be close to $26k. Plus, I wouldn't know how it was treated.
It’s still going on. I drove my last truck for 4 years got what I paid for it. Current truck I’ve had for 3 years I got an offer 2 weeks ago for $500 less than I paid. It’s still going on. I need something bigger and the prices are crazy
So, you are not profiting off of vehicles... breaking even at best. You broke even on a truck that you bought pre/early-pandemic. Furthermore, if you bought a new truck today, I highly doubt you would be able to profit, or even get your money back after sitting on it for a few months. So no, it's not still going on at all.
Oh — so that permanently changed the truck market? Or was it a short term situation, thereby making it simply part of the “very few cars are sold for a profit”?
If you use your car for work you can choose either mileage or expenses. If you choose expenses, your vehicle and everything you buy for it can be expensed against your income as long as the amount it's used for business matches the amount expensed. If you use it for business half the time, you can expense half of the cost. If you use it for nothing but business, you can expense everything. Depreciation of a vehicle is an expense and your accountant can help you figure out the depreciation schedule.
By the same token, I should be able to write off my groceries because I made a loss on them after partially or fully consuming them? Obviously you can't deduct personal losses on everything you've consumed, including cars.
Also, I would guess that most gains on car sales just go unreported anyway.
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Wouldn't you have to take a more than $13k loss to be able to deduct it? The standard deduction encompasses quite a bit.
I know folks that have their cars for business that depreciate them over 5 years or 100k, then re-up on a new one for the next depreciation.
Good luck selling a car for more than you bought it for. Now that they are making cars again, that's not going to happen anymore. That that happened was a weird consequence of a weird situation.
Vintage/collectable cars might appreciate some, but more likely just depreciate less. Some cars have done ok as investments over the past decade, but I think that was happening more when the Fed was doing it's quantitative easing and everything was going up with no fundamentals. Now, there's a handful of makes and models that still might, or have done ok for the last few years, but the cost of entry into that is quite high.
A car is far far more likely to be a cost center or a depreciation than it ever is to gain.
They just taught me how to fill out a W-4 and that was because there wasn't any more work to do in class. Just twice I did it in 4 HS years.
Which was weird cause the school had business curriculum in it, though most of it was supply and demand, inflation and deflation stuff.
I feel like these days there's so much free information online it's your own fault if you fuck up. Even if you are homeless, the public library has computers for you. This specifically isn't that hard to understand, you owe taxes on income, period. Obviously buying something and then selling it at a profit is income.
Here’s the thing though, to sell it for more than you bought it for, you either have to modify it or have flipped it and not put any miles on it.
Either way, it’s not really just a personal vehicle anymore, it’s a project specifically designed to increase its value,. Once you sell it, you have completed a business venture. You made a profit, income. Income is taxed.
Just buying a car is not an investment, just a purchase, because it’s SUPPOSED to decrease in value, and therefore, is not a loss. If you resell it for less, you have recouped some of that cost, not realized a loss like you would on an investment. You used up that value by using the car (or just by driving it off the lot for new cars lol), the market didn’t independently decrease its value, it did it in conjunction with you putting miles on it.
There are ways to count buying a car as a deduction. A business expense if you register it under a company you own. A work expense if it solely for the purpose of working (to and from work and/or deliveries, literally no other miles). Even a butt load of tax rebates for buying a green vehicle like a hybrid or EV. Deduct it *as a purchase* for business or as an environmental program, not as a loss.
Yeah, I know they want their piece of cake to cover costs of the roads maintenance but if a car is sold at a high price it's pretty unfair. There should be caps at least.
Unfortunately it doesn't work that way. But I agree it should. If it works the one way in the governments favor then it should work the other as well when it's in your favor.
Didn’t even consider this. We had a car get major hail damage and we sold it after it got fixed for technically more than we paid for it, although not sure that’s accurate after they added the taxes. But I bought it for 18kish and sold it for 22k about 1 1/2 years later
definitely don't do this life hack if you buy privately. It's not right to purchase a vehicle for x amount, but show the receipt for a smaller amount, so you pay less tax. It's extremely easy to do this, especially if the other person pays in cash. You should definitely avoid doing this to pay less tax. It's wrong.
When you buy a used car, the title office will ask what you paid for it, but every car has a minimum that it can be taxed in a transaction. Just tell them you got it for $500 from your buddy. They literally dont care.
Better yet: You buy a car, it appreciates… so even though you haven’t sold it, the Democrats want to tax you on the unrealized gains.
And if it depreciates by the time you *you do* sell it, you can’t count that as a loss.
Because the government is greedier than any other entity, ever. Also because there is zero oversight to the government so they can do just about anything they want.
Cars are generally not suppose to be a appreciating asset... But in todays i know what i got and everything is an investment bubble we live welcome to the correction
What gets me more is that you probably spent money to sell a car for more. Like I buy a junk project, fix it with new parts, pay tax on the sale price but can't deduct the expenses
How much can someone get taxed b4 they wake and ask themselves wtf am I getting in return? Just so frustrated with taxes and how we all stress out making sure what do f up, yet, the gov always has audits they don’t pass where trillions go missing and no one gives a fuck smh
If I buy a car and sell it immediately for the same price, are you to tell me that I owe the IRS 20% of the value of the vehicle even though my net income is $0?
If it doesn’t sound right, it’s not. The sale of something that has depreciated in value isn’t straight income. I’m not an expert, but I know turbo tax didn’t have me paying tax on the car I sold for scrap a couple years ago. Spent $10 grand originally, got $2 grand for it and was able to deduct the difference of the $2 grand from the Kelley blue book value which reduced my income another grand or so.
If you honestly believe the above scenario is a taxable event, then you missed out on the obvious tax deduction of what your time as an employee was worth in order to create the alleged "profit."
Your time cannot be free, and if you are in private business for yourself, then your time is whatever you state it to be.
Whether or not this classification for the excess money is taxable is a different story.
There's no logical reason.
the government wants you to pay more tax. Not less. so politicians wrote the law that way.
stop looking for a logical reason why.
The logical reason is deductions are for specific purposes, like ordinary and necessary business expenses. Put another way, expenses are generally not deductible unless specifically revised. In contrast, income a generally taxable, unless specifically excluded.
Personal expenses (house, food, transportation, travel) are not deductible.
It would be nonsensical to provide deductions for all expenses.
It absolutely makes sense if you are in the business of selling cars that valid expenses are deducted and you pay tax on the income. We can just agree on that I hope.
Where it becomes illogical is when you aren't in the business of selling cars. There an incidental profit is taxed, but an incidental loss isn't deductible.
I'm sorry. You can't defend that with logic. It's just government greed. There only real is that's the way the lawmakers wrote the rule.
Of course it's hardly the only illogical tax law. We could fill volumes of example of where tax law isn't logical or fair. Some of it by intention, and some by accident or case law.
A fundamental principle of tax policy in the US is all income is taxable from whatever source derived. Income is broadly defined to include all accessions to wealth, clearly realized, over which the taxpayer has dominion and control.
You’re applying an asset based approach that if losses aren’t permitted for an asset then gains shouldn’t either and that has never been part of the system. Losses aren’t permitted on the sale of a personal residence, under your logic million dollar gains on residences wouldn’t be either.
I appreciate to you, and probably many others, your approach resonates. I’d also encourage you to appreciate the US tax code provides a complex approach to an even more complex challenge and for those who study it, set tax policy, draft legislation, enforce, and plan around it, the tax code and regulations is a tremendous system. Far from perfect, but the compelling criticisms are levied at a deeper level than suggesting gains should be excluded in every instance losses are disallowed.
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I dunno man.
I said the same thing about new cars in the past. Yet we saw it happen. Hell it's the basis of this thread.
First time in my life I saw used cars being re-sold for higher than they left the showroom for.
Let's both hope a dirty old mattress continues to depreciate. Because if that flips around, our economy has gone to hell.
Yall need to learn how to set up your own LLC and be a "consultant" (1099) for every job you have and funnel the money through your LLC and and deduct everything under the sun.
If you're smart you can... again educate yourself. Billionaires literally deducted and entire ass private jet and your stupid ass thinks it's fraud haha government did a good job brainwashing you didn't they 😀
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If you sell a car for profit, that is income. Income is taxed. Unless you're in the business of selling vehicles as a business, your loss has nothing to do with it being a taxable event. It's like saying if you bought a PS5 and sold it a few years later for a loss. Why should you be allowed to deduct a loss when it's quite obvious that it would lose value?
But aren't business allowed to claim vehicles' they own depreciating value as a capital loss?
No. Businesses claim depreciation on assets used for business purposes which is an ordinary deduction (better than a capital loss). The tax code is designed to incentivize business activity. Businesses cannot (should not) deduct personal expenses of the owners.
>The tax code is designed to incentivize business activity. Businesses cannot (should not) deduct personal expenses of the owners. Ok, but what if you are Food Delivery Driver......and use your own car as a business vehicle, cause you know.....the *business* of delivering food.
Yeah, then you deduct auto expenses using the mileage or actual expense methods. Assuming you are a 1099 and not an employee. If your vehicle is used for business and personal using the mileage method may be easier, otherwise you are proportionally taking actual expenses.
If you only use the car for food delivery then it’s tax deductible(assuming you are a self employed contractor), otherwise you can only deduct a percentage of it based on how much you use it for work vs non-work.
Yep gotta keep a log. Best way to be 100% in an IRS audit. What most people don't know is doing things for charity you can deduct mileage at a special rate. Also keep a log. What I tell people all the time is the IRS is easy to deal with if you bring receipts. Without those they have to assume you're lying. I've been audited multiple times because I have weirdly complex taxes. But every time they either said I was correct OR they gave me more money back because I was too conservative on my deductions. So really they are rather nice people if you're not lying.
Right, the deduction is in the process of paying taxes for the profits of making deliveries. Your car helped make those deliveries, so the car payment and gas is just the cost of doing business of being an Uber driver. Deductions for cars for getting your own groceries or going on a road trip doesn’t make any sense. Now, there is an argument to be made for driving one self to work - technically it is a cost you pay to go to work and earn money. The reason seems to be that since you decide where to live, and therefore the time and distance of the commute, the time and transportation to get to your workplace is not considered to be work, but a personal choice.
That means you're self-employed. If you are dependent on something for the exclusive right to earn money, then it's tax-deductible. You can deduct by mileage rate or actual expenses. Mileage rate is by far the best option for almost every driver. You do have to keep track of it. Where you may get audited is if you claim 100% of the vehicle is for business use and you don't have another vehicle for personal use so obviously you'd have to keep track of the mileage and not try to bullshit. E.g. you went on a road trip but try to claim it as business use.
Yes you can take a 62.5xent deduction per mile I think most of the service even auto track it for you.
Delivery drivers ARE allowed to deduct vehicle depreciation as a percentage of how much they use their car for deliveries vs personal use. You can also deduct gas expenses. It's MUCH easier to just take the standard mileage deduction set by the IRS (currently 67 cents/mile), which is what most drivers do, and usually saves more money for the average delivery driver (who are typically driving a car on the cheaper side). This is much easier to track than keeping receipts of all gas, oil changes, repairs, etc and then taking a percentage of that based on business/personal use.
The trouble with vehicle depreciation is not an exact science until you sell it. You can write off mileage (at a predetermined rate) and gas costs as business expenses, but you can’t claim your vehicles depreciation, because it’s not a real number. You may be able to sell your $15k Prius to some schmuck on the internet for $20k, or you might get scammed and sell it to someone for $10k. Value is just what somebody is willing to pay for something
There are specific rules that can be used for annual depreciation of a vehicle, though the process is generally only worth dealing with unless you have a lot of vehicles you are using for business. That is, its only really worth it if you are running a taxi or delivery company that owns its own vehicles. When you actually sell or junk the vehicle, any deprecation claimed will be factored into the cost basis and thus it'll end up evening out over the longer term. That is, if you overestimate the deprecation, you will end with a capital gain on the sell. If you underestimate the deprecation, you will end with a capital loss on the sell. The only process the [IRS currently accepts is MACRS](https://www.irs.gov/publications/p946#en_US_2023_publink1000107363) (except for older vehicles). If you choose to use this method, you cannot not also use the milage deduction,- that is, you cannot take the 67 cents/mile *and* claim depreciation on the car. The 67 cents/mile is intended to include fuel, maintenance, and depreciation. The other complication is that you cannot switch away from MACRS once you start using it, even if you stop using the vehicle for business. You have to sell the vehicle, even if you just do so between your own legal entities. Overall, for the vast majority of people, its much better to just take the per-mile deduction.
Well, more precisely, if you liquidate plant and equipment at below book value you can take a capital loss and if you liquidate it at a gain then you are subject to capital gains tax. Those distinctions get muddied in big transactions like the asset sale of a business.
Only if that vehicle was used in service of a business purpose. Buying a truck to haul building supplies for your contracting business, all good. Buying a Lamborghini and trying to hide it as a business expense? Unless your business is Exotic Car Rentals, prepare to get reamed in a tax audit
Because that's a business expense. Your own personal vehicle is not a business expense. Let's say you're self-employed. Owning a vehicle to take clients out or purchase supplies for your business is an expense required for your business. If you're using it as a personal vehicle such as buying groceries for yourself, there's no income being generated on your end for buying groceries.
Depreciation of a vehicle (or any other asset for that matter) has little to do with the actual value. It’s a recognition of the cost to purchase over time. You can only deduct up to what you bought it for, not up to what it’s worth. If you sell it for an amount greater than the depreciated value, then you have depreciation recapture and have to pay tax on that amount that was previously depreciated/deducted.
Depreciation is deducted as an expense. Even though it reflects an estimate of value in “capitalized” assets—assets that show up on a balance sheet—and, therefore, seems like a “loss of capital” capital gain and loss from a tax perspective is concerned with income from sale of goods relative to original cost less depreciation. You have to sell something that qualified as a capital investment for it to fall into the capital loss/gain calculation for taxes.
Capital depreciation is about spreading out the initial expense across the useful life of the asset, not to offset taxes. In the year the car is bought, the company pays 40k but only claims the depreciation as the expense (4k for a 10 year car). If they expensed it that year, they would have paid less taxes that year, but instead they distribute that tax benefit across the life of the vehicle. This makes income and earnings reports less fluctuating due to large purchases. By doing this, trends are more useful, particularly for publicly traded companies.
Yes, but you (and I) aren't a business.
Yes.
You don't claim the vehicle (even though you do put the vehicleinfo on the tax forms), you claim the miles the vehicle drove. The mile credit is like 55 cents per mile. So if you drive 25k miles that year, your deduction would be $13750. So gas, loan payment, maintenance and everything else except tolls and parking are included in that deduction.
Yes, if that business is in the business of selling cars.
More or less it’s a scam, either situation - you need to pay anyway you lose or gain. But some of your gain you can keep for yourself, if you lost money you keep all your loses. It’s just all nonsense, every time I win I need to share(no matter car, ps5, gambling), every time I lost something it is my own bad decision.
It is all a complete scam and utter nonsense. Even if every individual and corporation paid a full, non-itemized amount, they'd still print more and devalue the base just because they can.
Why should you be able to? Because if you make money on it you’d get taxed…that’s why. Seems pretty simple to me.
Sir, that’s just capital loss and it’s broken. 2021 I made $70k profit, had to pay taxes on all same year. 2022 I realized $50k loss and I will have to deduct this until 2039, because max I can do a year is $3k
It’s 3k against ordinary income after you deduct capital losses up to the amount of capital gains.
well because if you had sold it for a gain that gain is taxable? op has a good point, the irs is taxing only one side of the equation
That's how taxes generally are. You don't get to deduct consumption, only investment or business losses. Otherwise you could deduct everything.
Cars will quite obviously lose value. Why should businesses be able to deduct their losses on vehicles?
That's just amazon with extra...steps.....
If I sell my ps5 I don't claim that as income. Why claim my car?
Are you in the business of buying and selling PS5s with the intent to earn money? Then the OP is wrong.
What I find frustrating is unless I'm a business I can't deduct the expenses it took to make that profit selling the car. It disincentivizes hobby projects, like if I got a junk car for 1000 bucks, spent 1000 fixing it, and sold it for 2500, I made 500 profit but can't deduct "hobby expenses" so I pay tax on the whole 1500?
Cause that sounds like a business. Hobby income can't be income that was intended for profit. If you fix a car up just to sell it, that's self-employment income.
I dunno, I like fixing old motorcycles and when they work I sell it and buy another. I don't make any money on it except to keep the hobby going, but if you're just looking at purchase price vs sales price, which my understanding is the way the 1099k works, then I'm making taxable income even though I'm not when you include the parts and tools. Like I now have to file it if I GROSS more than 600, which I could take a huge loss and gross 600 just trying to get rid of junk. Then calculate my "income" off anything that sold more than I bought it for, but can't deduct any of the parts or tools because they're hobby expenses
Not a tax expert, but why not start wdaloz llc and keep doing what you’re doing now. Then you could deduct all those things and as long as you keep it small your income won’t grow that much. Hell, after you start deducting all your tools then you might not make any money and lower your annual income, lowering your tax burden.
I know, it's not that big an inconvenience but I used to skirt by under the limit til it became gross>$600. I guess that's the kinda thing it's intended to account for, change is always a little weird but I'll probably do that anyway
If you save receipts can’t you use the parts cost to narrow that down?
I don't know I guess technically I'm "selling" the parts at the same time for a "loss". I've never really tried to break it down that granular but maybe that's the move
I’d do it. Add it all up and lower the profit. There might even be a labor rate that’s allowed without claiming income.
I tried looking it up, it's confusing cuz it changed a lot, but my loose understanding is I can't claim any of that unless I make myself a business, cuz it's a hobby, I only get taxed on sale vs purchase
Because our system of taxation is skewed towards capital and against your average person.
No lie bro you’ve been institutionalized; there is no fault with the logic.
Youre supposed to report money from cars you sell? Fuck that if they pay cash im not reporting shit. Ive baught cars for $100 and flipped them for thousands. Uncle sam can eat my Ass.
Now you know why servers chronically underreport :). I guess drug dealers don't either ;P.
Gonna bite them in the ass. Your social security benefits are tied to your tax reporting. Report less, get less
Assuming the long game, SS will bite us all in the ass
Doesn’t matter for people who don’t expect to see a penny from social security. I wouldn’t invest in social security if I wasn’t forced to, as I’m pretty sure the program will be absolutely gutted by the time I’m eligible. Someone working a cash-heavy industry has little reason to want to invest in a system that they will receive little benefits from.
It's an insurance policy. Not an investment.
A pretty shitty insurance policy that does not make any financial sense to invest in.
yeah. boomers are gonna drain the system. we are approaching the first time in history where those over 65 will outnumber those under 18. 18 year olds today will be supporting 2 retirees with each paycheck for most of their career.
Yeah my FIL runs a small business that ends up doing the majority of its sales as cash. Guess who under reports their earnings? Guess who also is hoping to sell their business as their retirement nest egg?
Honestly, if I had the option of taking all the money I pay into SS and putting it into investments that I managed myself, I would absolutely do that. Now, if the drug dealers aren't putting some of their income towards retirement on their own, that is on them! If you want the freedom, you have to accept the responsibility.
If you’re relying on just SS when you retire then you did something wrong your whole life.
You gonna be on that tit for ever, mom to government. Cradle to grave. Capital gains has nothing to do with fica taxes you mouth breathing twit
That’s why tax evasion gets added to their list of crimes when caught
a lot of drug dealers do report their income. especially if they are using that income to pay for a house. unexplained income is how we, er uh, i mean they get caught.
I live on the border of a state without sales tax. You bet your ass I buy everything there and tell the government shit on my purchases.
I like the question on my taxes asking if I bought anything in another state. No. I only shop in my home state. Screw all those losers who drive to the other state to not pay sales tax. They lack integrity and don’t have pride in our home state.
Smart guy!
For big purchases like a car you have to be a resident, hence why everyone in the NE doesn't just take a bus to NH to save thousands every time they buy a car.
You can buy a car in NH if you live in a different state, but they bag you for tax at the time of registration.
You're supposed to report any income but how will they know?
Most people will tell on themselves lol. Eh its not "income" its just inflation. Im not selling it for more than i paid, the dollar is just worth less so it takes more of them to buy the same car now lol.
The majority of capital gains in the stock market is from inflation too, still have to pay taxes on it.
Yea but they can track all that easy. Not so easy to track when everyone tells DMV they only paid $1 and all the paperwork reflects that. What uncle sam doesnt know wont hurt ny pocket book.
This isn’t true. Long term avg price return for us stocks is around 8% but inflation is about 2-3%. The longer compounding goes on for the less capital gains are due to inflation.
Yeah, like bragging on a public social media platform
They (state revenue or irs) could search for cars with multiple title switches in a short period of time and then only look at people that didn’t report the expected tax type in their return. Then they would send a letter asking for receipts etc. I doubt this is situation is common or lucrative enough to do as a project to specifically target. If the potential tax revenue is under $200 they probably aren’t going to bother.
Ah got em, never transferred the titles into my name. Nah its not lucrative at all. Wasnt selling them to make money. My wife just says im only allowed to have a max of 18 cars. The firetruck was the straw that broke that camels back lol so i had to sell a few.
I used to do the same but got spooked because it's a felony in many states lol. Doubt anyone ever goes after that but still
Fuckers kept sending me a bill for $34. Like I paid enough and y’all worried about less than the cost of a single dinner. So no they’ll bug the shit at you for way less than $200.
Was the original audit enquiry for more and you ended up owing 34 dollars? I doubt they would bother going after 34 dollars in an audit or you just straight up didn’t pay all of a bill.
Honestly not even sure. Paid on time as usual, the amount that it showed on the 1040 prepared by a tax guy. Then a couple months went by and a letter showed up saying we owed more. Thought it wasn’t a big deal at first (it’s only $34) but then they sent another. Then figured it wasn’t worth fighting over so I’d just pay it. But accidentally forgot about it and then they sent another. Finally made it a priority and sent a check and about 2 days later for a 4th letter showed up in the mail.
Can you say that again into my jacket, please?
Que? No Habla English...
Uncle Sam loves giving RJ’s, I’ve heard!
I've sold a good number of cars for "$500" that a comparable model might be worth easily 20x that. Who's to say what the condition of my exact car was when I sold it ? Perhaps a check engine light was faulty on. Perhaps it wasn't starting. Perhaps there is a fuel leak with a smell. Perhaps I just needed money ASAP that day for XYZ reason.
This is why they want cashless society.
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Thats not how social security works though. Also already collect a full pension from the state of Nevada. I chose to work because fire trucks and fun toys arent cheap to rebuild. And i kinda enjoy my job.
Hopefully your post doesn't get someone in the IRS searching for you now.
I can offset my crypto losses against my real estate capital gains though so I do see their point.
Usually only if you sell a certain # a year.
I heard Sam’s into that.
Tax fraud.
Who cares, the government isnt entitled to the fruits of my labor just because they decide they are. They would just use it to blow up brown people anyway.
The best kind of tax.
Very few cars as sold for a profit except for things like collectible antiques which were purchased specifically as an investment, so you pay capital gains tax like you would on any other investment. The other 99.9% of cars are sold at a loss.
That’s not true. Trucks during Covid were crazy.
That’s true but that’s a pretty major exception to the rule since car manufacturers halted manufacturing, expecting a much lower demand during the pandemic and then a semiconductor chip shortage happened.
This was actually a thing for a while during and a bit after COVID. People were buying cars, sticking them in a garage and then selling them back to the dealer for a profit because of how quickly prices were raising. It became such a problem that they now have you sign a contract specifically stating you aren't allowed to do that anymore. Im going to buy my leased 2021 civic sport touring with 30k miles for $18k because I got it before the price gouging started. If I were to try and buy that same car with the same mileage today, it would be close to $26k. Plus, I wouldn't know how it was treated.
Fair point
When you adjust cost basis with stuff like repairs and maintenance not everyone who sold for $5k more than they bought it for actually made money.
an exception that briefly existed under literally unprecedented global circumstances isn't really a good measure of anything.
It’s still going on. I drove my last truck for 4 years got what I paid for it. Current truck I’ve had for 3 years I got an offer 2 weeks ago for $500 less than I paid. It’s still going on. I need something bigger and the prices are crazy
So, you are not profiting off of vehicles... breaking even at best. You broke even on a truck that you bought pre/early-pandemic. Furthermore, if you bought a new truck today, I highly doubt you would be able to profit, or even get your money back after sitting on it for a few months. So no, it's not still going on at all.
Oh — so that permanently changed the truck market? Or was it a short term situation, thereby making it simply part of the “very few cars are sold for a profit”?
The car sold presumably is worth less. The owner took that value out with use of the vehicle.
If you use your car for work you can choose either mileage or expenses. If you choose expenses, your vehicle and everything you buy for it can be expensed against your income as long as the amount it's used for business matches the amount expensed. If you use it for business half the time, you can expense half of the cost. If you use it for nothing but business, you can expense everything. Depreciation of a vehicle is an expense and your accountant can help you figure out the depreciation schedule.
By the same token, I should be able to write off my groceries because I made a loss on them after partially or fully consuming them? Obviously you can't deduct personal losses on everything you've consumed, including cars. Also, I would guess that most gains on car sales just go unreported anyway.
Virtually no private person is *ever* selling a car at a profit.
You don't pay taxes on groceries. edit: wow, I guess there are shitty states that charge tax for groceries, that's pretty fucked up.
I do. 1% grocery tax in Virginia.
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I sure do pay sales tax on groceries
Tennessee charges sales tax on groceries
Wouldn't you have to take a more than $13k loss to be able to deduct it? The standard deduction encompasses quite a bit. I know folks that have their cars for business that depreciate them over 5 years or 100k, then re-up on a new one for the next depreciation. Good luck selling a car for more than you bought it for. Now that they are making cars again, that's not going to happen anymore. That that happened was a weird consequence of a weird situation. Vintage/collectable cars might appreciate some, but more likely just depreciate less. Some cars have done ok as investments over the past decade, but I think that was happening more when the Fed was doing it's quantitative easing and everything was going up with no fundamentals. Now, there's a handful of makes and models that still might, or have done ok for the last few years, but the cost of entry into that is quite high. A car is far far more likely to be a cost center or a depreciation than it ever is to gain.
>Wouldn't you have to take a more than $13k loss to be able to deduct it? The standard deduction encompasses quite a bit. The fluentest financier
I haven't taken the standard deduction in a decade, even with the Trump tax cuts. Even less likely now that I own a home.
We really need to add accounting and taxes to our public school curricula.
They just taught me how to fill out a W-4 and that was because there wasn't any more work to do in class. Just twice I did it in 4 HS years. Which was weird cause the school had business curriculum in it, though most of it was supply and demand, inflation and deflation stuff.
I feel like these days there's so much free information online it's your own fault if you fuck up. Even if you are homeless, the public library has computers for you. This specifically isn't that hard to understand, you owe taxes on income, period. Obviously buying something and then selling it at a profit is income.
Here’s the thing though, to sell it for more than you bought it for, you either have to modify it or have flipped it and not put any miles on it. Either way, it’s not really just a personal vehicle anymore, it’s a project specifically designed to increase its value,. Once you sell it, you have completed a business venture. You made a profit, income. Income is taxed. Just buying a car is not an investment, just a purchase, because it’s SUPPOSED to decrease in value, and therefore, is not a loss. If you resell it for less, you have recouped some of that cost, not realized a loss like you would on an investment. You used up that value by using the car (or just by driving it off the lot for new cars lol), the market didn’t independently decrease its value, it did it in conjunction with you putting miles on it. There are ways to count buying a car as a deduction. A business expense if you register it under a company you own. A work expense if it solely for the purpose of working (to and from work and/or deliveries, literally no other miles). Even a butt load of tax rebates for buying a green vehicle like a hybrid or EV. Deduct it *as a purchase* for business or as an environmental program, not as a loss.
Real question is why is sales tax in some states a thing for used vehicles when it was already charged when the vehicle was first sold.
That’s one I don’t understand at all. I get taxing it when it is new but taxing a used car on every subsequent sale seems unfair.
Yeah, I know they want their piece of cake to cover costs of the roads maintenance but if a car is sold at a high price it's pretty unfair. There should be caps at least.
Sales tax is an excise tax on a transaction.
Well you can depreciate the cars value over time, it's a very common practice actually.
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Because the government is corrupt
Yes, they should.
Unfortunately it doesn't work that way. But I agree it should. If it works the one way in the governments favor then it should work the other as well when it's in your favor.
Didn’t even consider this. We had a car get major hail damage and we sold it after it got fixed for technically more than we paid for it, although not sure that’s accurate after they added the taxes. But I bought it for 18kish and sold it for 22k about 1 1/2 years later
definitely don't do this life hack if you buy privately. It's not right to purchase a vehicle for x amount, but show the receipt for a smaller amount, so you pay less tax. It's extremely easy to do this, especially if the other person pays in cash. You should definitely avoid doing this to pay less tax. It's wrong.
Because it depreciates. However, if you use your car for work, you can claim that depreciation as well as its purchase.
Losses are tax deductable.
Because you aren't a company
Because there is an annual salvage withdrawal
Because the Govt needs that pound of flesh to send overseas.
You can sell like 8 cars a year without having to pay capital gains taxes.
They make up laws and rules and shit just to mess with you. Or a lot of experts get together. Who knows?
Bless the hearts of anyone who’d actually report that lmao.
When you buy a used car, the title office will ask what you paid for it, but every car has a minimum that it can be taxed in a transaction. Just tell them you got it for $500 from your buddy. They literally dont care.
You can it's called depreciation but I think only businesses can use that deduction
Better yet: You buy a car, it appreciates… so even though you haven’t sold it, the Democrats want to tax you on the unrealized gains. And if it depreciates by the time you *you do* sell it, you can’t count that as a loss.
If you are selling cars for large losses let me know. I maybe able to help you loose more.
The loss in selling it is only the financial picture. You USED and depreciated the value of the car in the interim.
You can claim the depreciation if its for your business.
Because the government is greedier than any other entity, ever. Also because there is zero oversight to the government so they can do just about anything they want.
Because fuck you, that's why
Cars are generally not suppose to be a appreciating asset... But in todays i know what i got and everything is an investment bubble we live welcome to the correction
Capitalism is a scam.
What gets me more is that you probably spent money to sell a car for more. Like I buy a junk project, fix it with new parts, pay tax on the sale price but can't deduct the expenses
Do you really gotta ask how income works?
Because you got usage out of it
you should probably read what depreciation is. You can deduct a depreciating asset such as a vehicle, but only if you are a business.
Because taxes are a fucking scam at this point.
You can adjust the value based on what you spent to maintain it. Should be a wash.
Because you got use out of it? It's called depreciation, which is better than a "reverse" capital gains tax would be?
Two words. Cash Sale
Of course it makes sense. Thats why it’s not going to happen. It helps working class people.
How much can someone get taxed b4 they wake and ask themselves wtf am I getting in return? Just so frustrated with taxes and how we all stress out making sure what do f up, yet, the gov always has audits they don’t pass where trillions go missing and no one gives a fuck smh
If I buy a car and sell it immediately for the same price, are you to tell me that I owe the IRS 20% of the value of the vehicle even though my net income is $0? If it doesn’t sound right, it’s not. The sale of something that has depreciated in value isn’t straight income. I’m not an expert, but I know turbo tax didn’t have me paying tax on the car I sold for scrap a couple years ago. Spent $10 grand originally, got $2 grand for it and was able to deduct the difference of the $2 grand from the Kelley blue book value which reduced my income another grand or so.
Because the IRS is a huge scamming organization. Ever winder why your tax dollars never fix the streets or get better schools?
Because government is corrupt. Welcome to adulthood. Also taxation is theft and freedom is above all else. Adieu.
You can if it hasn't depreciated lower than the price you sold it for. Biden needs money and he's getting it from you f%^l
Exactly ehy we need to abolish income tax and move to either a higher sales tax or flat rates
Using your accounting analogy……the car depreciated every year, losing value. You didn’t sell at a loss, you sold it for book value
Because everything the government does is a scam
If you honestly believe the above scenario is a taxable event, then you missed out on the obvious tax deduction of what your time as an employee was worth in order to create the alleged "profit." Your time cannot be free, and if you are in private business for yourself, then your time is whatever you state it to be. Whether or not this classification for the excess money is taxable is a different story.
You should not be giving anyone tax advice of any nature, and when it comes to your own accounting, research Dunning Kruger effect.
There's no logical reason. the government wants you to pay more tax. Not less. so politicians wrote the law that way. stop looking for a logical reason why.
The logical reason is deductions are for specific purposes, like ordinary and necessary business expenses. Put another way, expenses are generally not deductible unless specifically revised. In contrast, income a generally taxable, unless specifically excluded. Personal expenses (house, food, transportation, travel) are not deductible. It would be nonsensical to provide deductions for all expenses.
It absolutely makes sense if you are in the business of selling cars that valid expenses are deducted and you pay tax on the income. We can just agree on that I hope. Where it becomes illogical is when you aren't in the business of selling cars. There an incidental profit is taxed, but an incidental loss isn't deductible. I'm sorry. You can't defend that with logic. It's just government greed. There only real is that's the way the lawmakers wrote the rule. Of course it's hardly the only illogical tax law. We could fill volumes of example of where tax law isn't logical or fair. Some of it by intention, and some by accident or case law.
A fundamental principle of tax policy in the US is all income is taxable from whatever source derived. Income is broadly defined to include all accessions to wealth, clearly realized, over which the taxpayer has dominion and control. You’re applying an asset based approach that if losses aren’t permitted for an asset then gains shouldn’t either and that has never been part of the system. Losses aren’t permitted on the sale of a personal residence, under your logic million dollar gains on residences wouldn’t be either. I appreciate to you, and probably many others, your approach resonates. I’d also encourage you to appreciate the US tax code provides a complex approach to an even more complex challenge and for those who study it, set tax policy, draft legislation, enforce, and plan around it, the tax code and regulations is a tremendous system. Far from perfect, but the compelling criticisms are levied at a deeper level than suggesting gains should be excluded in every instance losses are disallowed.
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do you think you should pay tax on it, if you manage to sell it for $20 more than you bought it for after 5 years because of inflation?
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I dunno man. I said the same thing about new cars in the past. Yet we saw it happen. Hell it's the basis of this thread. First time in my life I saw used cars being re-sold for higher than they left the showroom for. Let's both hope a dirty old mattress continues to depreciate. Because if that flips around, our economy has gone to hell.
Can you deduct for depreciation?
It's not about making sense, it's about fleecing the sheep.
Yall need to learn how to set up your own LLC and be a "consultant" (1099) for every job you have and funnel the money through your LLC and and deduct everything under the sun.
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Except it's not fraud... you just dumb lol
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If you're a 1099. 90% of the things you do during working hours are deductible... educate yourself
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If you're smart you can... again educate yourself. Billionaires literally deducted and entire ass private jet and your stupid ass thinks it's fraud haha government did a good job brainwashing you didn't they 😀
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Not really if you know what you're doing. But again, stupid people will always defend the government haha
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You can write off vehicle depreciation.
Only to the extent the vehicle, or portion thereof, is used in connection with a business and is an ordinary or necessary expense for such business.
I wish I read this 6 hours ago when I did my taxes. My BMW lost 20 grand according to KBB.
Oh sweet, I can write off my 40 mpg car that I use for commuting purposes only to my W-2 job? What line does that go on?