If I sold a car in 2022 for profit, do I need to report that and if so, how?

[wtstodd96]

I did not pay for the car when I got it a few years ago. I sold it for 6,800 dollars in 2022. Do I report that. If so how and would it just be to federal or to states too?

[MarilynG1]

If your report the sale of your personal vehicle for a gain (you sold it for more than you paid for it) in the Investments section, you will be taxed for a Capital Gain on the sale.

Here's more info on Capital Gains. 

This amount is added to your Federal income, and flows into your State return, so you don't need to report it again in your state return. 

@wtstodd96 

[fanfare]

if the car was a gift to you, you have a basis so you should look that up before paying tax on $6,800.

@wtstodd96 

[GeorgeM777]

The IRS has a FAQ that addresses the question you have raised.  You may have to report the income you received but it all depends on your basis in the car.  Basis is the same thing as cost.  Even though you did not pay for the car, it was a gift, you still have a basis in the car because you will likely use the donor's adjusted basis as your basis.  Once you have determined your basis, you will know whether you have to report its sale.  Keep in mind, that if the car was worth more than what you received, you will have a loss, but it will be a non-deductible loss because it is a personal loss.  In contrast, when you sell a personal item, like a car, for more than what its worth, you have to report the gain on your tax return and pay income tax on that gain.

Below is the FAQ prepared by the IRS.

Question

What is the basis of property received as a gift?

Answer

To figure out the basis of property received as a gift, you must know three amounts:

• The donor's adjusted basis just before the donor made the gift.
• The fair market value (FMV) of the property at the time the donor made the gift.
• The amount of any gift tax paid on the gift 

If the FMV of the property at the time the donor made the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.

• Your adjusted basis for figuring a gain is the donor's adjusted basis just before the donor made the gift, increased or decreased by any required adjustments to basis while you held the property.
• Your adjusted basis for figuring a loss is the FMV of the property at the time the donor made the gift, increased or decreased by any required adjustments to basis while you held the property.
• Note: If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property.

If the FMV of the property at the time the donor made the gift is equal to or greater than the donor's adjusted basis, your adjusted basis is the donor's adjusted basis just before the donor made the gift, increased or decreased by any required adjustments to basis while you held the property.

• If the donor paid a gift tax on the gift and made the gift after 1976, increase your basis by the gift tax paid on the net increase in value.

@wtstodd96