Car sale capital gains when trading in etc?

[KenDz06]

We are in a unique last 18mo with inflation and car shortages causing crazy car prices.
I have a scenario I'd like to ask. (using super round numbers)
I have a RED car, and I would like to sell it and buy an identical BLUE car.

I bought 5 years ago for $10k. With the inflation and  the use car market the way it is now, its worth $20k. I sell the RED car for 20k, and buy (or trade) for the identical BLUE car for 20, (which also used to be 10k a few years back)
So now I essentially have the same car, worth the same amount but  I have to also pay 20% long term cap gains tax on the $10k for this "swap"????
I believe there used to be a 1031 rule for this, but are we now getting punished lol?

[GeorgeM777]

Unfortunately, Section 1031 exchanges no longer apply to vehicles.  The 2017 Tax Cuts and Jobs Act (TCJA) limited like-kind exchange treatment to exchanges of real property.  As of January 1, 2018, exchanges of personal or intangible property such as vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for nonrecognition of gain as like-kind exchanges. Also, like-kind exchange treatment applies only to exchanges of real property held for use in a trade or business or for investment.  An exchange of real property held primarily for sale does not qualify as a like-kind exchange.

@KenDz06

[Mike9241]

assuming you're are filing as single do you have taxable income of over $400,000? that's about what it takes to have the gain taxed at 20%. your actual tax on the gain could actually be 0%  if taxable income is under $40,000.

[KenDz06]

Definitely not anywhere near $400k, but when i plugged my actual number in TT, it shows I'll owe $12k in cap gains, roughly 15%

[ColeenD3]

You will pay tax on the gain, regardless of what you do with the money. The red car will show a gain of $10,000 and the blue car, when sold, will have a cost of $20,0000. Personal losses are not deductible.