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? – David Schwartz Jan 28 '18 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. – Dilip Sarwate Jan 28 '18 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? – Five Bagger Jan 28 '18 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. – Dilip Sarwate Jan 28 '18 at 18:46
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    @PeterK that possible duplicate is a different country – GS - Apologise to Monica Jan 28 '18 at 19:56

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


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 '18 at 17:03

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