If I bought a car with a loan for $14,000, then sold it for $18,400, and $11,000 of that went to pay off the loan, do I still file capital gains? And for what amount?

[coreyeacretpba]

I bought a 2018 Nissan Sentra back in 2019, then sold it last year for more than I paid for it. The difference exactly was $3,481.50 between the amount financed and the amount for the sale. I received $7,397.06 from the sale, with the rest going to payoff the loan of $11,002.94 still owed. 

I did then use the rest of the money, plus some of my own added in, as a down payment on another car a few months later (had to wait due to inventory issues during 2022, hence the sale while price was high, then wait to get the car I wanted). 

So the question is does the loan impact the whole capital gains thing? Do I need to calculate it based on how much of the loan I paid versus how much I got back? Or just off the sale of the car? I am so confused as to what to do xD

[Mike9241 · Accepted solution]

it you have a gain it's a sale of personal property taxable as a capital gain. the gain is measured by the difference between your purchase price and what you sold it for. financing has nothing to do with computing the gain. buying a new vehicle with the proceeds does not affect the computation of the gain. 

$18,400 sales price less $14,000 is $4,400

[coreyeacretpba]

Ok, wanted to double check as I've only ever done just normal simple returns, this is the first year I've had to do more (car sale and gambling winnings), so its a whole new ballgame for me and I have no idea what counts or doesn't. Thank you so much for the quick reply!