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If I sell a car or boat at a profit, I assume I have to pay a capital gains tax.

Does it work in reverse as well? Can I declare a capital loss if lose money on the sale of a car or boat?

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    For what purpose did you own the vehicle? Was it for personal use? If a business asset, could you have depreciated it? Did you? Jan 28, 2018 at 5:42
  • Losses on personal property (including houses, not just cars and boats) are not capital losses for tax purposes and cannot be deducted on your tax return. Jan 28, 2018 at 16:55
  • @DilipSarwate Hmmm, ok, what is the rationale. If I have to pay a capital gains tax on a profitable sale, why can't I take a capital loss if I sell at a loss? Jan 28, 2018 at 18:29
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    @FiveBagger It is the law that you cannot claim a capital loss on personal property, and the law does not need a rationale. If you don't like the law, petition your Congresscritter to work towards changing it. Jan 28, 2018 at 18:46
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    @PeterK that possible duplicate is a different country Jan 28, 2018 at 19:56

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No, you cannot. It looks like if you sell it at a profit you would be subject to capital gains but if you sell it at a loss you are not eligible for capital loss deductions. This is presumably because most cars depreciate and are expected to be sold for a loss. Such loss could be gamed very easily and it would be easy to pay little to no tax.

Source: Tax Planning Guide

Example:

Imagine if a business could do this. If they sell at a profit, that means they would have to have either put lots of work into it, make an arbitrage deal, or hold a classic long enough for the value to rise again. These are all legitimate ways of making money.

On the flip side, a car that is purchased (at least for a company) is subject to amortization in which the cost of the vehicle can be deferred against income and serves as a tax shield. Allowing this to be deducted could inadvertently create a situation where a company is benefiting from the amortization tax shield and the capital losses.

Hope this helps!

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  • For some reason all references are for Canada. However, in US it's not allowed either. "Losses from the sale of personal-use property, such as your home or car, aren't tax deductible." ref irs.gov/taxtopics/tc409
    – karakfa
    Nov 19, 2018 at 17:03

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