Will I pay taxes if I sell a car?

The rules and laws on what taxes you pay when selling your car to a private party vary by state (and in some cases even by city). The most important thing to know is that you only pay tax on any profit made from the car sale. If you sell a car for less than you paid for, there’s no sales tax. However, if you sell your car for more money than you paid for it, the Internal Revenue Services (IRS) considers that a capital gain, and you’ll need to report it when you file your federal and state income taxes. Only then will you know if you owe any taxes. For more information, read out full guide: Understanding Taxes When Buying and Selling a Car

If you want to save on taxes, consider trading in your car. Depending on your state's tax laws, a trade-in can potentially save you a substantial amount in sales tax, in some cases, as much as thousands of dollars.