@soulwinner10 wrote:
Thanks for your reply. Yes, it was my personal car, not for business. To be clear though, I purchased the car in 2016 for $1,504.21 and received $1,500.00 in 2023 (sold to dealership). It is not much of a loss ($4.21).
To confirm, your saying because it was for personal use and not business this is why it doesn't need to be reported....correct? I just figured because it is a loss that it would be.
Would you also please explain how the $1,000 I received on damage to the new vehicle is my own money being returned to me? I'm trying to make sense of it.
Thank You.
This is considered a capital gains/loss transaction. You have a gain when you sell an item for more than you paid, and a loss if you sell an item for less than you paid. For personal property, losses are not deductible, but gains are taxable. It's pretty remarkable that you could buy a used car in 2016 for $1500 and sell it in 2023 for $1500 (sounds like my son in law, actually), but you would only report the sale if you sold the car for more than you paid, and then only the gain (the difference) is taxable, not the proceeds. Since you sold at a small loss, the loss is not deductible or reportable.
The $1000 returned to you is essentially a discount on the purchase price, and discounts are not taxable income. It does reduce your cost basis (your purchase price) that you will use to calculate your gains or losses if you sell the car in the future.
