Do You Pay Taxes When You Sell Your Car?

If you’re selling your car, then you might be wondering if you have to pay taxes on the sale. Most people aren’t aware that you do have to pay taxes on the money you receive from selling your car – in most states, it counts as income. However, there are ways to avoid paying taxes on the full amount of money you make from selling your car. If this applies to you, then keep reading and discover more about car removals.

Pay taxes when you sell your car

How do I pay the tax on my car if I am selling it myself? If the car is worth $10,000 or less, you will not have to file a federal tax return unless you receive income from another source. You may have to submit a state tax return depending on where the vehicle was purchased. How can I avoid paying any taxes when I sell my car?

Speak with an accountant or tax professional before selling the vehicle as they may be able to recommend additional steps to avoid incurring these costs. Can Car Removals help me find out how much the car is worth for tax purposes? Car Removals has a free service that will allow you to learn how much a specific make and model of car is worth on today’s market.

What about if you make a profit?

If you make a profit from the sale, then yes, the IRS will want their share. If your total taxable income for the year is less than $37,950 and you’re single or if it’s less than $74,900 and married filing jointly, then there are no income tax implications. If not, then the government will take its cut out of any profits. You’ll also need to factor in state taxes as well and keep track of sales tax due on any vehicle purchased as a result of trading in one.

What about if you lose money on the sale?

If the car is worth less than what was paid for it, then there is a tax deduction. But if you end up paying more than the cost of the car, then there are no deductions to be had. This is because it’s considered a form of capital gain and therefore not eligible for deductions. Car removals will handle all paperwork and provide receipts if needed.

What are the tax obligations when selling a car?

First, make sure to ask the buyer for their SSN. This is necessary in order to register the vehicle in their name. Once the sale has been finalized, you will need to fill out a form from the Department of Motor Vehicles (DMV) that includes the following:

  1. The date of sale
  2. The vehicle’s year make and model
  3. The purchase price
  4. Your signature and Social Security Number
  5. The buyer’s address and Social Security Number

Once this form is filled out, take it back to the DMV with your driver’s license. They will then process all necessary paperwork including registering the vehicle in the buyer’s name. You may also be responsible for paying transfer fees depending on where you are selling it.


The short answer is yes, if the vehicle was a registered and titled motor vehicle with a current registration. But there are some exceptions for vehicles that have been junked or declared as salvaged. It’s also possible to avoid paying taxes on the sale of a motor vehicle by gifting it to another person instead of selling it, but this isn’t usually an option for people who want to get rid of their old car.


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