Printable View
Am in the process of selling my '73 and read the IRS page on what is considered investment income along with the whopping tax rate. My question is whether the sale amount of the car is added to total income, which may pop me up a bracket, or is it treated as a form of separate investment income which is taxed independently? Thanks
I'm not an accountant, but wouldn't the IRS count it as capital gain, and tax as such?
Let me try again... and in my gut I feel this would not occur but have not crossed this bridge before.
To add the cars' profit (with its own special tax) to my regular income, which would then be taxed together, would be double taxation. Can one stay out of a higher tax bracket by just paying the special tax on the gain?
Rick, it's Capitol gains tax...just like you would pay on any other investment. It's not considered income and you are essentially investing money that you have already been taxed on. You are taxed the Capitol gains tax rate on the profit...sale price less purchase price, ALL invested money, advertising etc. someone mentioned that taking it to shows etc may be considered "advertising"...that might be a little questionable but I'd try to legitimately offset as much of the profit as possible. Then when you are done figuring what you have invested in the car and what taxes you will pay, you can decide if its worth selling and how much it is going to cost to build something to replace it ;)
Can you declare a capital loss on a car you sell at a loss?
OK, personal daily driver is one thing, but a collectible/vintage. Only seems fair....
I think most of us have bills for repair, maintenance, insurance, storage, etc., that offset most of the "gain." I've never reported a significant chunk of income from a car resale for that reason. When analyzed, cars are not terribly profitable investments.
Be careful in this area. Not any and all expenses may be used to offset gain, the asset (car) must be held as an investment, and not be for personal use, such as you driving it. Brian
Maintenance can't be used to offset but capital improvements can. Anything held less than a year get taxed at ordinary income rates. At one year it's long term capital gains.
Tom
If you are selling your '73 and are going to be buying another collector car within six months, you may want to read the IRS Code section on 1031 Exchanges...
The early cars are getting up in this territory where it starts to make sense...
I do have to disclose that I am not an accountant, tax professional or attorney and when doing a tranasction like this you may want to consult all three, but I would rather pay their fees and possibly not be bumped up to another tax bracket...
And like Dennis Miller used to say, "Of course that's just my opinion, I could be wrong."
Works better with real estate but can be used for cars. You just have to buy another car. There is a step-up in basis that will help your heirs (at least in real estate).