Sold my car, what is the cost basis for tax purposes?

Question

I sold my car this year in a private sale. Originally I thought my cost basis was the original amount I paid for the car when I bought it. A friend of mine told me that since I sold it for more than was left in my financing payments (ie my sell price was greater than what I still owed) it counts as capital gains. So is the cost basis the amount that was left to be paid on the car at the time of sale or the original cost of the car when first purchased?

Follow-up question: If it is original cost does that mean I can claim it as capital losses?

Thanks for any help!

Answer 1

Your friend is wrong. Unless you sold it for more than you paid originally, you didn't have a capital gain. The financing has no effect on gains or losses. The basis is the original cost of the car.

Losses on personal items aren't deductible, so no, you don't have a loss that affects your tax return.

Answer 2

The cost basis is the amount that you originally paid for the car plus any improvements that you made while you owned it.

Most likely, you will have a loss on the sale. Since, cars are considered personal property, you will not be able to deduct the loss for your taxes. However, if you have a gain, you have to pay taxes on that gain.

Answer 3

Your friend is incorrect. The basis of the car is the purchase price.

If you sold your car for less than the original sales price, you have no gain to report, and no deduction since it is personal use property.

If you sold the car for more than the original purchase price, the difference between the sales price and the original purchase price is a capital gain reported on Schedule D.

Answer 4

Unless you used the car in a business, there is no tax on the gain from sale of personal property. It's like selling your sofa.

If you used the car in a business, the cost basis is the purchase price less depreciation.

Financing the purchase or remaining balance you owe does not enter into the tax computation.

Answer 5

Your friend is lacking in any sense of a clue. Your basis is what you paid for it. Unless you sold if for more than you paid for it, there are no tax consequences. You cannot take a loss on the sale of personal property.

Answer 6

original cost plus any expense, as in upgrades.