Tax Tips: Selling Your Car or Buying From a Private Seller? Here Are the Tax Tips You Should Know

The first is that if you’re selling your car for less than what you paid for it, you likely won’t need to pay any sales tax on the sale because the IRS considers selling a used car for less than what you paid a capital loss. However, if you’re selling your car for more than what you paid (like if it’s a classic car you’ve restored and it’s increased in value), you may need to pay sales tax.

If you’re buying a car from a private seller, you may need to pay sales tax, but this sales tax doesn’t go to the seller – it goes to the Department of Motor Vehicles and is incorporated into your car’s registration.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from CarGurus⁵                                                                                                                            

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