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Has anyone here actually had the IRS come after them for selling a personal car? I've sold like 5 cars over the years and never reported any of it on my taxes. Should I be worried about past sales?
If you sold them all at a loss (like most personal cars), there's nothing to report anyway. The IRS is mainly concerned with gains, not losses on personal items. And they have bigger fish to fry than tracking down every personal vehicle sale. Unless you're flipping cars as a side business or selling exotic vehicles for large profits, it's extremely unlikely they'd ever question it.
This is a great question that trips up a lot of people! The key thing to understand is that when you receive a gift, you inherit the donor's "basis" (what they originally paid) for tax purposes. Since your car was originally purchased for $38k and you sold it for $15,800, you actually had a capital loss of about $22,200. However, the IRS has asymmetrical rules for personal-use property like cars - while capital gains would be taxable, capital losses aren't deductible. So you don't owe any capital gains tax (since you had a loss, not a gain), but you also can't use that loss to reduce other taxes. The good news is this is actually the most common scenario with personal vehicles since they typically depreciate over time. Just keep your documentation (bill of sale, any gift paperwork) in case you ever need to show the IRS how you calculated your basis, though it's unlikely to come up since there's no tax owed.
This is really helpful! I've been wondering about this exact situation since I'm planning to sell a motorcycle my uncle gave me a few years ago. The documentation part is something I hadn't thought about - do you know what specific paperwork the IRS would want to see if they ever questioned the basis? I have the original title transfer showing it was a gift, but I'm not sure if I have records of what my uncle originally paid for it.
One thing people overlook in this discussion - if one of you has significant medical expenses (over 7.5% of your AGI), filing separately COULD be beneficial. My husband has ongoing medical issues, and his expenses easily exceed that threshold on his income alone. But when combined with my income, we couldn't deduct as much. We saved about $1,800 filing separately last year despite losing some credits. Just another angle to consider based on your specific situation. Tax software often misses these nuances.
Adding to the great advice already shared - as someone who's worked in tax preparation for over 15 years, I can confirm that for your specific situation (significant income disparity, three kids, homeownership), filing jointly is almost certainly your best bet. The key thing people don't realize is that when you have unequal incomes, the lower-earning spouse essentially "fills up" the lower tax brackets first, creating substantial savings. With your $120k/$40k split, you're getting maximum benefit from this effect. A few quick calculations based on your numbers: filing jointly, you'd likely qualify for the full $6,000 in child tax credits ($2,000 per child), plus potential additional child tax credit refunds. Filing separately, the higher-earning spouse would lose most or all of these benefits due to income phase-outs, while the lower-earning spouse couldn't claim all three children. My recommendation: run the numbers both ways using tax software, but I'd be genuinely surprised if separate filing saves you money. The math just doesn't work out in favor of separate filing for families with kids and significant income gaps like yours.
This is really helpful insight from someone with actual tax prep experience! Quick question - when you mention the lower-earning spouse "filling up" the lower tax brackets first, does that mean the $40k income gets taxed at the lowest rates and then the $120k income gets taxed at progressively higher rates? I've never really understood how that works mechanically when you file jointly. Also, is there a rule of thumb for how big the income disparity needs to be before filing jointly becomes clearly advantageous? Like if both spouses made $80k each, would joint vs separate filing make much difference?
Has anyone here tried using a written business plan to document your intent with the vehicle? My CPA had me create one for my Turo business to show legitimate business purpose.
I've been through this exact scenario with my luxury SUV on Turo. The harsh reality is that you can't deduct the entire $165k purchase price even with 100% business use for those 2 months. The IRS calculates business use percentage based on the entire tax year, so 2 months = roughly 16.7% maximum deduction. Even with Section 179 and bonus depreciation for vehicles over 6,000 lbs, you're still limited to that business use percentage. Plus, there are luxury auto depreciation limits that cap your deductions regardless. The bigger issue is that switching to personal use right after taking business deductions could trigger recapture rules and look like tax avoidance to the IRS. I'd strongly recommend keeping it as business use for at least the full year if you're going this route, and definitely consult a tax pro before dropping $165k on this plan.
Thanks for breaking this down so clearly! As someone new to both Turo and business vehicle deductions, this is really helpful. I was actually considering a similar setup with a smaller luxury vehicle but your point about the recapture rules is concerning. When you say "switching to personal use right after taking business deductions could trigger recapture rules" - does this mean you'd have to pay back some of the deductions you already took? And is there a minimum time period the IRS expects for legitimate business use? I'm trying to understand if there's a safe way to do this without it looking like tax avoidance, or if it's just better to keep vehicles either fully business or fully personal from the start.
I almost signed up with Optima last year but decided to check reviews first. Thank god I did! Instead, I went directly to the IRS and set up a payment plan myself. It took one phone call (admittedly after being on hold for 2 hours) and I was approved for a monthly payment I could afford. These companies make it sound like you need some special expertise or insider connections to deal with the IRS, but for most basic tax problems, you absolutely don't. They're just inserting themselves as expensive middlemen.
Did you have to provide all your financial details to get the payment plan? I'm worried about the IRS wanting to see all my bank statements and stuff before they'll approve a payment plan.
This is exactly why I always tell people to be extremely cautious with these tax relief companies. The pattern you described - big promises upfront, poor communication after payment, and then trying to silence customers with NDAs - is unfortunately very common in this industry. The fact that they're demanding you sign an agreement to remove negative reviews in exchange for a partial refund is a huge red flag. Legitimate businesses don't operate this way. They're essentially admitting their service was inadequate while trying to manipulate their online reputation. For anyone reading this who's dealing with tax problems: before paying anyone thousands of dollars, try these free or low-cost options first: 1. Call the IRS directly to discuss payment plan options 2. Use the IRS Online Payment Agreement tool 3. Contact your local Low Income Taxpayer Clinic (LITC) if you qualify 4. Consult with a local CPA or Enrolled Agent for a transparent fee quote Don't let these companies prey on your stress about tax issues. Most tax problems can be resolved without paying these inflated fees to middlemen who often provide little actual value.
This is such valuable advice, thank you for laying out these options so clearly. I'm actually dealing with a similar situation right now where I owe about $8,000 to the IRS and have been getting calls from multiple tax relief companies promising they can "settle my debt for a fraction of what I owe." After reading this thread, I'm definitely going to try calling the IRS directly first before paying anyone thousands of dollars. It's honestly a relief to hear that most people can handle this themselves - these companies make it sound like you need a team of lawyers and specialists just to talk to the IRS. The Low Income Taxpayer Clinic option is something I'd never heard of before. Do you know if there's an income threshold to qualify for their services?
Mei Zhang
Small thing to add - if you're using the standard mileage rate and deducting tolls separately, make sure you're only deducting the business portion of those tolls. If you use your car 70% for business and 30% personal, you can only deduct 70% of the tolls.
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Liam McConnell
ā¢What's the best way to calculate that percentage? Do I need to track total miles for the year and then figure out how many were business miles?
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Kristin Frank
ā¢Yes, that's exactly right! You'll want to keep a mileage log throughout the year tracking your total miles driven and which trips were for business purposes. At the end of the year, divide your business miles by total miles to get your business use percentage. For example, if you drove 20,000 total miles and 14,000 were for business, that's 70% business use. Then you'd only deduct 70% of your toll expenses as business deductions. The IRS expects contemporaneous records, so it's much better to track this as you go rather than trying to recreate it at tax time. A simple smartphone app or even a notebook in your car works great for logging business trips and their purposes.
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Fatima Al-Farsi
Great question! I went through this exact same situation last year with my freelance work. The good news is that toll expenses are definitely deductible separately from the standard mileage rate - they're specifically excluded from what the standard rate covers. Just a heads up though - make sure you're only deducting the business portion of those tolls. If you use your car for both business and personal driving, you'll need to calculate the percentage that's business use and only deduct that portion of your toll expenses. Also keep in mind that if you're an employee rather than self-employed, unreimbursed business expenses like this are generally not deductible under current tax law (suspended through 2025), unless you fall into certain categories like qualified performing artists or military reservists. Those EZ Tag receipts will be perfect documentation - just make sure to keep a detailed log of which trips were business-related so you can match them up with the toll charges. Good luck with your taxes!
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Mei Liu
ā¢This is really helpful! I'm just starting out with freelance consulting and had no idea about the business percentage calculation. So if I'm understanding correctly, I need to track ALL my driving throughout the year, not just business trips? That seems like a lot of record keeping. Is there a simpler way to estimate this, or does the IRS really expect exact mileage logs for everything?
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