Tax implications of selling my car for less than purchase price in 2024
I bought a car back in 2023 for about $35k and I just sold it to Carvana last month for $17.5k. Before selling it, I had completely paid off the loan on the vehicle. Here's what's confusing me - from a tax perspective, did I technically sell this car for a profit in 2024? Since I received $17.5k but didn't owe any more money on the car at the time of sale? I'm trying to understand if this is something I need to report on my taxes next year or if it's considered a loss. The car was just for personal use, not business. Thanks for any help!
21 comments
Join the conversation
Mikayla Davison
You actually took a loss on the sale, not a profit. For tax purposes, you need to compare the amount you received ($17.5k) with your cost basis (what you paid, which was $35k). Since you received less than what you paid, you sold at a loss of $17.5k. The good news is that for personal-use vehicles, you generally don't need to report losses OR gains on your tax return. The IRS considers personal cars to be personal-use property, and losses on personal-use property aren't deductible. If you had somehow sold your car for MORE than you paid (which rarely happens), you would have needed to report the gain as a capital gain. The loan status doesn't matter for determining profit/loss - what matters is the original purchase price versus the selling price.
0 coins
Adrian Connor
•Wait, so what if the car WAS used for business purposes? Like if I was using it partly for Uber or something? Would the loss be deductible then?
0 coins
Mikayla Davison
•That's a great question. If the vehicle was used partially for business (like for Uber or other self-employment activities), then a portion of the loss could potentially be deductible. You'd need to calculate what percentage of the vehicle's use was for business versus personal use. For business-use vehicles, you would have been tracking business mileage and taking either the standard mileage deduction or actual expenses on your tax returns. When you sell, you can deduct the business portion of the loss on your Schedule C. For example, if you used the car 30% for business, you could potentially deduct 30% of the loss.
0 coins
Aisha Jackson
Ran into this exact situation last year and spent HOURS trying to figure it out. Then I discovered https://taxr.ai and it literally solved this in minutes. I uploaded my car purchase and sale docs, and it gave me a complete breakdown of the tax situation - explained I took a loss and didn't need to report it since it was a personal vehicle. Their AI actually showed me what forms would've been needed IF it had been a business vehicle too. Saved me from making a mistake on my return. No more spending weekends reading IRS publications!
0 coins
Ryder Everingham
•Does it handle more complicated car situations? I sold a car last year that I was using 40% for my real estate business and I'm not sure how to report it.
0 coins
Lilly Curtis
•Do they actually analyze the documents or just give generic advice? I've tried other "AI tax" tools that basically just regurgitate general info that I could find anywhere.
0 coins
Aisha Jackson
•It handles partial business use situations really well! Just upload your documents showing purchase price and sale amount, then indicate the percentage of business use. It calculates the deductible portion of the loss and shows exactly how to report it on your Schedule C. For your second question, it actually analyzes the specific documents you upload. It extracts the numbers from your purchase agreement, loan documents, and sales receipt, then applies the tax rules to your specific situation. Much more personalized than generic advice sites. It even flags potential audit triggers based on your specific numbers.
0 coins
Lilly Curtis
Just wanted to follow up about my experience with taxr.ai. I was skeptical at first but decided to try it with my car sale situation (sold my Jeep at a loss after using it partially for my photography business). The tool actually extracted all the relevant info from my documents and provided a super detailed explanation about how to handle the business portion of the loss. It even generated the exact numbers I needed for my Schedule C and explained how to calculate the adjusted basis. Definitely saved me from making a costly mistake. Pretty impressed that it handled my specific situation instead of just generic advice.
0 coins
Leo Simmons
If anyone needs to confirm this kind of tax situation directly with the IRS, I'd highly recommend using https://claimyr.com to get through to them. Tried calling the IRS for 3 weeks straight about a similar car sale situation last year and could never get through. With Claimyr, I got a call back from the IRS in about 45 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed exactly what the first commenter said - personal car sales at a loss don't need to be reported, but business vehicle losses are partially deductible. Worth the time saved just sitting on hold for hours.
0 coins
Lindsey Fry
•How does this actually work? Do they somehow let you cut the line with the IRS? That seems too good to be true.
0 coins
Saleem Vaziri
•I'm really skeptical about this. The IRS phone system is notoriously impossible, especially during tax season. How exactly would some third party service get priority access? Sounds like a scam tbh.
0 coins
Leo Simmons
•It doesn't let you cut the line - what it does is automate the calling process. The service basically calls the IRS repeatedly using their system until it gets through, then when it reaches a human, it calls you and connects you. For your skepticism - I totally get it. I felt the same way until I tried it. They don't have "priority access" - they just use technology to handle the frustrating part of repeatedly calling and waiting on hold. It's basically just saving you from having to manually redial for hours. The IRS doesn't even know you're using a service - from their perspective, it's just a regular call that happened to get through.
0 coins
Saleem Vaziri
I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway since I needed an answer about my car sale situation from 2024. The service actually worked exactly as described - I got a call back within about an hour and was connected directly to an IRS agent. The agent confirmed that my personal vehicle sold at a loss doesn't need to be reported on my taxes, but they also helped clarify some questions I had about depreciation recapture that would have applied if it had been a business vehicle. Saved me hours of frustration and got me a definitive answer straight from the source.
0 coins
Kayla Morgan
Just wanted to add - make sure you keep records of your original purchase price and the sale to Carvana just in case. Even though you don't need to report the loss on your taxes, it's good to have documentation if you're ever audited and need to prove it was a personal vehicle sale at a loss. I keep a tax folder with each year's records including things like this. Car sales can sometimes trigger questions if the amounts are significant.
0 coins
James Maki
•How long do you need to keep these kinds of records? I've sold a few cars over the years and never kept the paperwork thinking it wasn't necessary for taxes.
0 coins
Kayla Morgan
•Generally, you should keep tax-related records for at least 3 years from the date you filed the return, as that's the standard IRS statute of limitations for audits. However, if they suspect substantial underreporting, they can go back 6 years. For significant transactions like vehicle purchases and sales, I personally keep those records for at least 7 years. Digital copies make this easier - just scan everything and keep it in a folder with your tax documents for that year. Better to have them and not need them than vice versa!
0 coins
Jasmine Hancock
Does anyone know if there are different tax rules for classic or collector cars? I sold an old Mustang last year and actually made a profit (bought it in rough shape years ago and restored it). Is that different than a regular car?
0 coins
Cole Roush
•Yes! Collector cars can be treated as capital assets, and if you sold it for more than you paid (including restoration costs), you'd report it as a capital gain. If you owned it more than a year, it would be a long-term capital gain which is taxed at a lower rate than ordinary income. Make sure you document all the restoration expenses as they increase your cost basis. So if you bought it for $5k, put $10k into restoration, your basis would be $15k. If you sold for $25k, your taxable gain would be $10k.
0 coins
Jasmine Hancock
•Thanks for the info! That makes sense. I kept most of my restoration receipts but probably not all of them. Sounds like those costs really add up to reduce the taxable amount. I'll make sure to report it correctly when I file next year.
0 coins
Evan Kalinowski
One thing to keep in mind is that even though you don't need to report the loss on your personal vehicle sale, if you had any outstanding loan balance when you sold it, that doesn't change the tax treatment. The IRS looks at the economic substance - you bought for $35k, sold for $17.5k, so you had a $17.5k loss regardless of loan status. Also, since you sold through Carvana, they should have provided you with documentation of the sale price. Keep that along with your original purchase paperwork as Kayla mentioned. Even though it's not reportable, having clean records makes everything easier if questions ever come up. The confusion about "profit" vs "cash received" is totally understandable - a lot of people think getting cash means profit, but from a tax perspective it's all about the difference between what you paid and what you received, not your loan balance.
0 coins
Yara Sabbagh
•This is really helpful clarification! I think a lot of people get confused about the loan aspect because psychologically it feels like "profit" when you walk away with cash after paying off debt. But you're absolutely right - the tax calculation is purely purchase price minus sale price, regardless of financing. One follow-up question though - does it matter if some of the original $35k purchase price included taxes, fees, or extended warranties? Or is it just the vehicle price itself that counts as the cost basis?
0 coins