I just got a little question. I've been thinking of selling my Fit due to financial reasons and hardly driving it to begin with, and I was talking to my brother about it. He was telling me about how I'd have to pay taxes on what I get back.. But I was reading online and I guess it's situational. I figured I'd ask here and hope those who have sold cars privately can give me a clear answer.

My situation is this.. I still owe about 10k left on my Fit, and originally bought it for 18.5k out the door. I found a buyer who seems willing to pay 14k for mine. which is a 4k difference from what I owe, and a 4.5k difference on what I paid for.

Now my brother was saying that since I'm getting back 4k, that's technically income I'd have to submit for taxes, but since I originally paid 18.5k for the car(which I think should be it's value right?), would I lose 4.5k? So I wouldn't have to file it in my taxes correct?

Okay I lied, it wasn't a little question. :P

Any help would be greatly appreciated...

 

when you sell it private party, yes..you are responsible to pay taxes on income. Will it be a loss, not sure about that. If you sell below what you owe, that would be a loss IMO. Will the buyer 1099 you? I highly doubt it. How many things have you sold on eBay or craislist and not told uncle same about the money?

I guess it's a moral judgment. I wont say what I have done in the past.

 

So the "value" of my car is pretty much what I owe left? I find that silly since while I do make some money back that I invested in the car, I still have a 4.5k loss from the original purchase price..

I guess you're saying my brother is right then? Your answer was kinda vague in terms of my example. I was just mainly curious if my selling situation is an actual income or if it's still considered a loss?

I think really weirdly so I often question my own answers.

 

Yes, your brother is right. I can't necessarily tell you what i have done or what I would do if i were you, but i can let you guess Yes, you have a $4.5k since original purchase price of $18.5k....but it's not worth $18.5 is it? You could also say "I put gas in my car to get to work so i can pay down the debt on it."

Would you get credit for that in a sale? Nope

The value is one of two things, what KBB says or what someone is willing to pay for it. LEGALLY you will need to pay taxes since anything OVER your owed amount is considered income.

 

Bleh.. Well that sucks. :P Thanks for the input. I still don't understand why a lot of others think the same as I do from the web searches I've done, but I wouldn't doubt what you and my brother says is how the government would think as well.

Time for some more thinking now.. Hopefully I can find a job soon to continue payments so I can just pay this damn car off and not worry about bills so much.