Author Topic: What are the IRS rules on taxing the sale of a classic car?  (Read 2626 times)

shelbydoug

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What are the IRS rules on taxing the sale of a classic car?
« on: March 16, 2022, 10:55:27 AM »
Here's a scenario to consider in your response.

Presuming that say a "Shelby" was purchased in 1970 for $1,000, and kept and maintained all these years and sold now for $150,000, is the amount dealt with like selling a stock or like selling a house?

The reason that I ask, a stock has no maintanence cost. If I bought 1,000 shares of Apple at $4 per share and sell it now there was no cost to me of maintaining it.

On a car, there were 40 years of insurance, repairs, and other maintenance to maintain it's value. Without actually totaling the number, that could be more then the actual sales price of the car?

So how does this get declared? Is there a "discussion" or debate with the IRS about that AND does this have to be declared as "ordinary income"?
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FL SAAC

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #1 on: March 16, 2022, 10:59:56 AM »
Simple, original purchase price + repairs+maintenance+expenses related to the car

Subtract selling price

Pay capital gains on those profits

C.G. currently at 15% but the new administration wants to raise in order to fund other programs.....
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shelbydoug

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #2 on: March 16, 2022, 11:13:17 AM »
I need more opinions. CPA says it's the same as stocks.
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TOBKOB

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #3 on: March 16, 2022, 11:24:42 AM »
I have the receipts for parts from the 70's as well as from the restoration from a few years ago but most folks don't hang on to them that long. If you don't have them then I'm pretty sure taxes would be owed on the entire amount.  :'(   >:( The down side to the receipts from the 70's, stuff was so cheap they wouldn't help much. I guess it's a good thing I don't ever plan on selling.  :)

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67 GT350

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #4 on: March 16, 2022, 11:29:49 AM »
Sort of like selling on ebay. EBAY assumes that everything you sell is 100% profit, thus, YOU PAY!!! LOL What a nightmare!
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Bill

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #5 on: March 16, 2022, 11:50:02 AM »
I need more opinions. CPA says it's the same as stocks.

For long term ownership like yourself, a good accountant will negate any capital gains, as the car was originally purchased as a daily driver, or a weekend toy, and not as an investment. Not all "perceived profits" will be treated like a short or long term stock trade would.

Now, if you purchased a car last year, and sold it this year for a large profit, then yes, short term capital gains will apply. Yet, once again, a good accountant will lesson the blow to your tax bill.


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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #6 on: March 16, 2022, 12:38:28 PM »
I need more opinions. CPA says it's the same as stocks.

Nope, no more opinions listen to your CPA and if you are selling, here is some info :

House Democrats on Monday proposed raising the top tax rate on capital gains and qualified dividends to 28.8%, one of several tax reforms aimed at wealthy Americans to help fund a $3.5 trillion budget plan. The top federal rate would be 25% on long-term capital gains, which is an increase from the existing 20%

The above prompted us to sell two properties
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mark p

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #7 on: March 16, 2022, 01:08:39 PM »
I need more opinions. CPA says it's the same as stocks.
For long term ownership like yourself, a good accountant will negate any capital gains, as the car was originally purchased as a daily driver, or a weekend toy, and not as an investment. Not all "perceived profits" will be treated like a short or long term stock trade would.

Now, if you purchased a car last year, and sold it this year for a large profit, then yes, short term capital gains will apply. Yet, once again, a good accountant will lesson the blow to your tax bill.
Bill

Thanks Bill.
note to self: "Good Accountant" could be needed down the road.
A car purchased yea4s ago as part of a "hobby", that requires all of the above noted expenses - PLUS indoor parking/storage - certainly seems a different situation vs stock/bonds.
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rockhouse66

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #8 on: March 16, 2022, 01:21:06 PM »
Yes, you need professional advice, not Internet advice.  However, I don't think you can add routine maintenance costs to your cost basis.  Things you spent money on to improve the cars value help to increase your cost basis but maintenance does not.  That has been my understanding.

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #9 on: March 16, 2022, 01:58:25 PM »
I have been telling him to get professional advice for years.

 8)

Harris Speedster

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #10 on: March 16, 2022, 02:03:40 PM »
I would seek sound legal or CPA advice as all say above.

But a few things you might bring up, not sure if they will pertain or not;
As mentioned above, expenses related to the cost of ownership should be deductible.
Insurance, yearly  licensing taxes, maintenance, storage will real receipts, improvement costs, and perhaps more, ?

You might mention all this to whomever you confer with.
Like trades may play a part, kind of like in real estate which is a common in practice.
Sometimes, you have to step up to something worth at least $1.00 dollar more, there may be exceptions?
You may be able to "defer" some of the proceeds.
YOU, may not touch the money from the sale at that time, will have to be through an attorney.
Say your selling at 150K, add up your expenses you encountered, >>> hopefully with receipts>> and hold to present to your chosen tax person.
 
Find an investment vehicle >>> say worth 50K that you can live with and enjoy.
The chosen investment vehicle will be bought through your attorney with the sales money HE collected as your legal counsel, proceeds are then profit after the above deductions, and the attorney can wire or send a check in your name then.

Proceeds are then profit after the >>> above deductions for your tax person are figured in, CPA or ?
Lets say 150K, minus >>>500. to attorney, minus 40 years of deductions, $22,000, original purchase $1000. and 50K for new investment vehicle.
Maybe 75 K for tax base then ?
,
Would be good to start a new portfolio on the new investment automobile.
When you sell the NEW investment vehicle, taxes will then be fully due at current rates.

Run it past a CPA that has true knowledge, not a part time Jan-April tax office.
Hope all works out.
Respectfully,
john
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shelbydoug

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #11 on: March 16, 2022, 02:24:21 PM »
I have been telling him to get professional advice for years.

 8)

No, no. You keep saying, "get help...please".  ::)
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FL SAAC

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #12 on: March 16, 2022, 04:13:37 PM »
FYI - but again consult a CPA

To determine exactly how much you’ve gained on your sale, you’ll need to locate the original purchase price of your vehicle, minus any taxes you paid when you bought it.

If you made any improvements to the car, such as adding a stereo system or having it repainted, you’ll add the cost of those to the original purchase price.

Do not include any money you spent on maintenance, such as oil changes or tire rotation. If the amount your buyer paid for the car is higher than what you have invested in the car, you will report the capital gain on Schedule D, Form 1040, on the line marked “Capital Gains and Losses.” If you had the vehicle one year or less before selling it, it’s a short-term capital gain.

Otherwise, you’ll list it as a long-term capital gain.
Living RENT FREE in your minds...

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A person without a sense of humor is like a wagon without springs.  It's jolted by every pebble on the road

I have all UNGOLD cars

I am certainly not a Shelby Expert

Life is short B happy

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #13 on: March 16, 2022, 04:36:33 PM »
This is where I also think dealing with a person one on one will pay off better than a auction house. Cash has not been outlawed yet, or has it?

My own 2 cents as they seem to think and say.
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shelbydoug

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Re: What are the IRS rules on taxing the sale of a classic car?
« Reply #14 on: March 16, 2022, 05:05:50 PM »
Selling a vintage Shelby is one thing but a Cobra that has appreciated from $5,000 to a million, now that's an issue with angst.

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