Tax question: car sale profit

Submitted by andoocampu t3_y7i1lg in Washington

Hi all, if I bought a car needing TLC, cleaned and fixed it, used it and then sold for profit, do I have to pay short term capital gain? If yes, should I pay it right now or when I'll submit my year taxes?

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geronimo2000 t1_isuzq4i wrote

if it's not a "trade or business" it's not going to be taxable income. If it is a business it would not be a capital gain - the resale price would be ordinary income, against which you would take your expenses including the original cost of the car.

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DerekL1963 t1_isv4aur wrote

When it comes to tax questions, always consult a tax professional. (Which the folks at H&R Block, Liberty Taxes, and other tax mills aren't.) Never rely on randos on the 'net.

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DangerousMusic14 t1_isvxdqi wrote

WA does not have capital gain income tax so your question is federal related.

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Remarkable_Ad7161 t1_isumuw4 wrote

I'm not a tax professional, but I do do a lot of taxes of various forms by myself. So in emcee, this is based on being self taught, and might not be 100% accurate. Given that, I believe you do, but do include cost that you spent as a part of capital expenses. As for when - that depends on what the percentage is. Typically you want to pay 90% of the taxes owed up to the point by the end of each quarter to avoid fees, however this is the final quarter, so as long as you can mention the sale being in the final quarter, you can pay it as a part of your final tax submission.

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andoocampu OP t1_isuunck wrote

The sale was in the first quarter. Does it make sense to pay it at the end of the year, or should I do it now via the IRS portal?

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lred1 t1_isumxgj wrote

Technically, yes Your taxable gain is sales price minus purchase price minus expenses incurred in 'fixing it up'.

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andoocampu OP t1_isuuy7h wrote

Since I fixed the car in my garage, I am not even sure how to calculate the expenses.

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lred1 t1_isv0xpg wrote

Don't worry about it. Really, it will never be anywhere near on the radar of any taxing authority.

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Piddy3825 t1_isv05ma wrote

nope, not unless you do it as a business. this is a one time deal right?

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