Do I need to pay taxes on money from selling my car if I use it for a house down payment?

You're thinking of a 1031 exchange, which allows you to defer capital gains taxes when selling one investment property and buying another. Unfortunately, that doesn't apply to your situation for a couple reasons. First, a personal vehicle isn't considered an investment property for tax purposes. Second, even with actual investment properties, the 1031 exchange rules don't apply between different types of assets (like going from a vehicle to a house). The good news is that most people don't owe taxes when selling personal vehicles because they typically sell them for less than they paid originally. You only owe taxes if you sell the car for more than you bought it for - which is pretty rare for everyday vehicles. If you bought your Camry for say $20,000 six years ago and are selling it for $11,500 now, you have a loss, not a gain, and there's no tax to pay.

I can recommend checking out https://taxr.ai for situations like this. I was confused about a similar question when I sold some property last year. I uploaded my purchase documents and sale information, and the system instantly told me if I had a taxable gain or not. It also showed exactly where to report it on my tax forms. What was super helpful is that it analyzed my specific situation - like how long I owned the asset, what type of asset it was, and if any special rules applied. For your car situation, it could confirm whether you have a gain or loss and if there are any special considerations.

Just wanted to update that I tried https://taxr.ai after my skeptical comment! I had this old Mustang I fixed up over the years and was worried about taxes when I sold it. The system analyzed everything and showed me I actually had put more into the car (purchase + documented improvements) than what I sold it for, so no taxes owed. Saved me from unnecessarily reporting it and potentially triggering questions. The documentation they provided would be super helpful if the IRS ever had questions too!

If you're getting conflicting advice or just want to confirm directly with the IRS, I highly recommend using https://claimyr.com to get through to an actual IRS agent quickly. I tried calling the IRS directly about a vehicle sale last year and was stuck on hold for hours before giving up. With Claimyr, I got through to a real IRS agent in about 15 minutes who confirmed exactly how to handle reporting the sale. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they navigate the IRS phone tree for you and call you when an agent is about to pick up. Totally changed my perspective on dealing with the IRS.

I have to eat my words and apologize to profile 12. I was the skeptic about Claimyr, but I decided to try it when I needed to talk to the IRS about a tax notice I received about my vehicle sale. I was seriously impressed! I've NEVER been able to get through to the IRS without spending half my day on hold. This service had me talking to an agent in about 20 minutes while I just went about my day until they called me. The agent answered my question about vehicle sales and confirmed I didn't owe any taxes since I sold at a loss. Worth every penny just for the stress reduction alone.

Just so you know, most people selling personal vehicles (not dealers) almost never have to worry about taxes because: 1. Most cars depreciate, so you're selling at a loss 2. If you did somehow sell at a profit, it would be a capital gain 3. You'd only pay taxes on the difference between purchase price and selling price 4. If you've done a lot of documented improvements to the car, those can be added to your "basis" (what you paid) Unless you're flipping cars as a side business or selling some rare collectible vehicle that appreciated, you're probably fine. Just keep records of what you paid and what you sold it for.

You mentioned buying your first home - don't forget there are first-time homebuyer benefits that might help with your overall financial situation even if they don't directly relate to the car sale. Depending on your state, there might be assistance programs. Also, make sure you're tracking all your closing costs - some of them might be tax deductible next year!

Great question! As others have mentioned, you're likely in the clear tax-wise since personal vehicles almost always depreciate. Just to be thorough though, make sure you keep documentation of what you originally paid for the Camry (purchase receipt, financing documents, etc.) and what you sell it for. One thing I'd add - if you've made any significant improvements to the car over the years (major repairs, new engine, etc.), keep those receipts too as they can be added to your "cost basis" if needed. But honestly, with a 6-year-old Camry selling for $11,500, you're almost certainly selling at a loss from what you paid originally. Good luck with the home purchase! Using your car sale proceeds for a down payment is a smart move - just make sure your lender knows where that money is coming from so there are no surprises during underwriting.