Are Personal Asset Sales Taxable Income? Some Answers

Most Americans know that income they earn from a business or in an employee paycheck must be reported to the IRS as potentially taxable income. But what about your personal assets? If you sell something of your own and make a profit, is this taxable on your income tax return? On the other hand, can a loss be used to reduce taxable income? Here's what you need to know about personal property sales. 

Any Capital Gain May Be Taxable

Generally, any profit from selling a capital asset (items of significant value that are usually held for multiple years) is subject to taxes. This includes personal investment items like antiques, collectibles, stocks and bonds, real estate, and equipment. It even includes the family car. 

Many Personal Sales Are Losses

However, in reality, many of these sales don't result in tax. This is because you can deduct more than just the amount you paid for the item before determining profit.

The tax basis includes the purchase price but also taxes, improvements, some major repairs, shipping, insurance, and other costs. If you purchased your car for $10,000 and spent $2,000 on these other expenses over the years, a sale for $11,000 results in a net loss rather than a taxable $1,000 gain. 

Personal Losses Can't Be Deducted

The bad news is that you can't deduct the loss on most personal assets to reduce other taxable income. This includes that loss on when trading in your old daily use car.

An exception is made, though, for items intended to be held for investment. If you bought an antique car with the intent to restore it and sell it for a profit, this becomes an investment transaction rather than an incidental personal transaction. 

So if you lose money on that investment car, you may indeed be able to deduct the loss on Schedule D (Capital Gains and Losses) along with losses from non-retirement investment accounts and individual stocks or bonds. These may offset your other taxable income. 

Home Sales Have Unique Rules

One outlier to the rules about personal asset sales is your primary home. When a taxpayer sells their primary residence — which usually results in a profit — they are allowed to exclude the first $250,000 ($500,000 for married taxpayers) of profit. 

Your Tax Preparer Can Help

Many taxpayers don't know when to report money earned from unusual sources such as selling their car or their baseball card collection. So the best place to begin is to meet with an experienced tax preparation service in your state. They will work with you to identify any obligations resulting from your sale and minimize any taxes due. Make an appointment today for tax services

About Me

Choosing Tax Services

When you have a business, it is crucial to understand that taxes aren't optional. In addition to filing at the end of the year, many businesses also have to file quarterly, which can be a big adjustment if you aren't used to taking care of things. Although it can be difficult to move forward with different tax plans, it is important to make the necessary adjustments to keep track of everything you need to do. On this website, you will be able to find great tips and tricks about choosing tax services, as well as what to do when you have problems with your filing. By making the right changes, you can keep moving forward.



Latest Posts

3 May 2022
You use IRS services more often during tax season and when you wait to get your tax refund. However, the IRS could make its presence in your business

31 January 2022
Owning a small business is a task in itself. It can be awfully stressful taking on the responsibility of working for yourself, but also very rewarding

25 October 2021
Especially for small business owners, the bookkeeping process can be a steep learning curve. If you've been struggling with the financial record-keepi