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Hi I am thinking of selling my car. It is a very nice car, and I would have paid quite a bit in sales taxes. I live in Colorado.

I want to sell the car because of a few reasons. Biggest being that I cannot park outside in winter, else bunnies will eat my wiring. It's okay for now as I do freelance, but I am worried it will be an issue when I take my next job and have to park outside. Also the second is, I do freelance. After a year off and on work, my savings is not rebounding. Cutting my payments and insurance down would be nice.. Third it's a German car, and I am being told that it wont last much past 100k miles.. Guess I should have done more research! Last it's just too flashy. I overbought. I said to myself I should get a hot car, I can't afford a house in this foobar econ, so I might as well get a nice car.

Now if I get what Bluebook says I will, I am looking at like -10k to -15k for owning a car for just a year. Taxes, Service plans, packages, etc.

I am trying to figure out how I can maybe write off these losses, maybe get my sales tax back. If I lose too much money over all, it won't be worth selling, and I will be stuck with this anker payment.

  • Is your car used in your business? Have you been depreciating it each year? – JTP - Apologise to Monica May 30 '16 at 22:09
  • It is not. I do have an LLC though.. I've been sloppy and not logging business miles.. – StarWind0 May 30 '16 at 22:22
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    What do you mean by "I would have paid quite a bit in sales tax"? Did you pay it or not? – Nate Eldredge May 30 '16 at 23:46
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I don't think there's much you can do.

Losses from the sale of personal-use automobiles (used for pleasure, commuting, etc) are not deductible as capital losses. See IRS Tax Topic 409, end of the first paragraph. The expenses you incurred in owning and operating the car (insurance, fuel, maintenance, service plans, etc) are not deductible either.

If you used it partly for business, then some of your expenses might be deductible; see IRS Tax Topic 510. This includes depreciation (decline in value), but only according to a standard schedule; you don't generally just get to deduct the difference between your buying and selling price. Also, you'd need to have records to verify your business use. But anyway, these deductions would apply (or not) regardless of whether you sell the car.

You don't get your sales tax refunded when you resell the vehicle. That's why it's a sales tax, not a value-added tax. Note, however, that if you do sell it, the sales tax on this new transaction will be the buyer's responsibility, not yours.

You do have the option on your federal income tax return to deduct the state sales tax you paid when you bought the car; in fact, you can deduct all the sales taxes you paid in that year. (If you have already filed your taxes for that year, you can go back and amend them.) However, this takes the place of your state income tax deduction for the year; you can't deduct both. See Tax Topic 503. So this is only useful if your sales taxes for that year exceeded the state income tax you paid in that year. Also, note that state taxes are not deductible on your state income tax return. Again, this deduction applies whether you sell the car or not.

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