In California, how should I report the $1500 income from the BAR CAP vehicle retirement program?

Question

The California Bureau of Automotive Repair (BAR) runs Consumer Assistance Program (CAP) for vehicle retirement.

In a nutshell, if you have an old car that fails a smog check but still runs, you can be paid $1000 or $1500 (depending on various factors) to retire it. After various forms and paperwork, you turn it in to a recycling center and collect a check on the spot.

Here is more information about the program: https://bar.ca.gov/Consumer/Consumer_Assistance_Program/CAP_Vehicle_Retirement_Program.html

What I want to know is how this is supposed to be reported on income taxes.

Searching for it on the IRS website and a general search engine turned up a lot of information about caps on retirement programs, which isn't relevant, but nothing specific pertaining to vehicle sales.

I found form 1099-MISC (https://www.irs.gov/forms-pubs/about-form-1099-misc) which appears the most likely, but it's not directly applicable according to the information at that link.

This is for a friend I am working with who works for a non-profit and definitely doesn't have enough income where this will likely even matter, but she wants to ensure she handles her tax paperwork correctly (even though she's likely going to get a full tax refund no matter what).

Is there a proper IRS form on which the $1500 (in her case) or $1000 income from the vehicle retirement program should be reported as income?

(She's using Turbo Tax and there is no obvious place to enter the information.)

Answer 1

I am not a tax lawyer, but why wouldn't this just be a car sale? She has a car. She sold the car to an automobile dismantler (term used in the Vehicle Retirement FAQ). She was paid money. She should only owe tax if the amount she was paid for the car was more than the amount she paid. Example source: Car Gurus (not specific to this program, just about selling cars).

If she paid less than $1500 (the sales price) for the car with no repairs or other improvements to deduct from the sales price, then she would owe capital gains tax on the appreciation. The IRS suggests Form 8949 and Form 1040, Schedule D. Go to the IRS for the current links.

P.S. She cannot take a capital loss on a personal vehicle and deduct it from other capital gains.