Ask the Expert: How do I calculate sale of a car at a loss?
How do you zero out the sale of household items below their original cost on a tax return? If I sell a car for $22,000, for which I paid $30,000, the $22,000 isn't taxable. But eBay reports the $22,000 to the IRS on Form 1099-K, which I then must report on my tax return. Since this isn't taxable income, how is it deducted?
E-commerce platforms like eBay must report 2022 payments to their users that exceed $20,000 to the Internal Revenue Service on Form 1099. (And you’re required to include the $22,000 sale proceeds on your tax return even if it isn’t reported to the IRS on Form 1099.) But you’re right that it won’t be taxable.
The rules:
If you sell your car for more than its cost, your profit is taxable income. If you sell the car for less than its cost, your loss isn't tax deductible unless, like Jay Leno, you collect cars as an investment.
But the proceeds from a money-losing sale aren't taxable. Here's how to "zero out" the $22,000 sale price of the car you bought for $30,000:
Report the $22,000 on Schedule 1, Part I, Line 8z of Form 1040 like this: "Form 1099-K personal item (car) sold at a loss, $22,000." Then on Schedule 1, Part II, Line 24z ("Other Adjustments") report the amount of the purchase price that offsets the proceeds: "Form 1099-K personal item (car) sold at a loss, $22,000." Do not list the entire $30,000 you paid for the car — just the offsetting amount ($22,000).
The bottom line
When you sell a personal item at a loss, the sale proceeds aren't taxable.
More information
Correction: There was an error in my Feb. 5 column. A widow or widower’s survivor Social Security benefit is 100% of the amount his or her deceased spouse collected.
