PDA

View Full Version : Revenue Cabinet Replied About Tax On Car Win...


SonyaD81
December 27th, 2006, 9:11am
Ok so I wrote the Kentucky Revenue Cabinet to see if they could help me determine appx. what income tax on this car win will be.

This is the response I got:

Thank you for your email. Based on the information in your email, the approximate amount of tax on the car would be about $1160.00 ($20,000 times the maximum tax rate of 5.8%). This is the maximum tax amount, depending on the amount of deductions you may have on your Schedule A, etc, the tax may likely be lower. Know this is a bit vague, but without the exact amount of your income, it would be hard to say exactly how much your tax liability will be for 2007. Hope this information will help you. Thanks!

This sounds low to me, and I think they were talking about sales tax. As I spoke to a dealership about the cost I will have to pay for the car up front. Tax, Title, and fees will be $1,164.

Anyone ever heard of a car win being taxed so little? It would be great if the income tax will be the same as the sales tax but I highly doubt it lol.

SonyaD81
December 27th, 2006, 9:22am
Juts talked to my uncle, and he said it's low because that doesn't include federal lol. Poop! Back to the drawing board.

WeenyMomma
December 27th, 2006, 9:30am
:gvibes: First off CONGRATS!

As far as I know you don't pay Federal taxes when you buy a car. You pay sales tax on it like you would a new pair of pants at the department store when you initially buy it. I've never bought a new car, well brand new lol, but a friend had a used car lot and you just pay the state/local sales tax on it. Now as far as claiming that on your taxes I don't have a clue but even though it sounds cheap I think what they are telling you is right. :gvibes:

SonyaD81
December 27th, 2006, 9:33am
So you don't pay federal taxes on car wins? Can anyone confirm this? Doesn't sound right, but would be awesome if that were true.

I need to stucdy up on tax laws lol. WOuld be very useful for htis hobby.

guruwan2b
December 27th, 2006, 9:35am
When I won $28K at the casino I ended up paying about $8K in income taxes (state and federal combined).
Do you have a tax software? I used TaxAct and plugged the win into the previous year's tax form to see what it would come out. It came out real close to what I ended up paying.

SonyaD81
December 27th, 2006, 9:37am
When I won $28K at the casino I ended up paying about $8K in income taxes (state and federal combined).
Do you have a tax software? I used TaxAct and plugged the win into the previous year's tax form to see what it would come out. It came out real close to what I ended up paying.

Good idea lemme try that! I think our info, and the software are still on here...

WeenyMomma
December 27th, 2006, 9:49am
No no no, not saying that you don't pay federal taxes on the win. Wish that was true for you. What I'm saying is, the 1160 something they are telling you is what you would pay in taxes to a dealership if you went and bought a car. That is the amount they are giving you. That's not what you pay on your income taxes. If sales tax, title and licensing fees were not included and you are responsible for them aside from claiming the win on your taxes the amount they are quoting you is correct for that portion of it. That make sense at all?

WeenyMomma
December 27th, 2006, 9:53am
Ugh, I'm too tired to be trying to make sense I guess lol.

That is what they are quoting you though, the sales taxes.

Need to go back to bed now................. :sleep2: :laugh:

SonyaD81
December 27th, 2006, 10:02am
Can't find his W2 grrr. We still have the software but I had to reinstall it. I guess I'll be hunting for his W2 all day. Of course it's not in our tax folder, why would it be? He never puts anything back where it belongs :laugh:

retellingstories
December 27th, 2006, 10:04am
Think of it this way....

If the car's value is 20k, add that to your average yearly INCOME. So if you make 40k a year, now assume the tax man is going to bump you up to 60k a year. Reported wins are income, and the IRS treats them as such.

Just make sure you keep receipts and try to find all of the write-offs you can. There are some people here who do quite well sweeping, and have to report all of it as income. Just work with your imcome tax guy and see if he can find you some new write-off's or other things you may have not known you qualify for at the end of the year.

billbb
December 27th, 2006, 10:05am
I think you are getting confused about sales tax and income tax. The amount of tax you pay when you pick up the car is sales tax, depending on your state depends on how much you pay when you pick up the car. Then at the end of the year, you have income tax. The value of the car is added to your total income, say you make $10,000 per year and the car is worth $16,000, then your total income is $26,000. So when you file your state and federal income tax you pay taxes on total income of $26,000 (minus all deductions) So you won't know exactly what taxes you pay on the car till you complete your income tax. Either way, getting a brand new car for just sales and income tax is still a great deal. I hope I explained that right. congrats.

Bill

SonyaD81
December 27th, 2006, 10:28am
Ok just got his W2, our income has been pretty consitant over the past 9 years. Based off what he made last year, and adding the car to our income it says we would owe federal $575, and state $2,073. Total owed would be: $2,648

Add that to the sales tax, and fees I expect to pay I'll be paying $3,812 for a brand new car! Can't beat that with a stick lol :)

Knowing the general amount to expect will enable me to start saving back. I will definately be able to keep this car! :D :D

That is not bad at all! :) I expected to owe much more than that. We usually get a large return so what we usually would have gotten back helped cut down the bulk of what the taxes would have been.

Thanks for the idea guru! :)

Now I can stop fretting over what these taxes will be, it should be in the same general area unless something drastic happens to our income.

pinkDaisy
December 27th, 2006, 11:46am
Ok just got his W2, our income has been pretty consitant over the past 9 years. Based off what he made last year, and adding the car to our income it says we would owe federal $575, and state $2,073. Total owed would be: $2,648

Add that to the sales tax, and fees I expect to pay I'll be paying $3,812 for a brand new car! Can't beat that with a stick lol :)

Knowing the general amount to expect will enable me to start saving back. I will definately be able to keep this car! :D :D

That is not bad at all! :) I expected to owe much more than that. We usually get a large return so what we usually would have gotten back helped cut down the bulk of what the taxes would have been.

Thanks for the idea guru! :)

Now I can stop fretting over what these taxes will be, it should be in the same general area unless something drastic happens to our income.

yeay!!!!!!!!! :jump:

Harry
January 1st, 2007, 4:08pm
Sonya,
You do have to declare the fair market value of the car as income on your Federal Tax return and pay the tax. When you go to the Kentucky Dealer to get the car transfer papers completed the "Total Consideration Given" for your "New Vehicle" on Ky Revenue Cabinet form 71A100 Affidavit from the Dealer should be close to zero dollars since you won this car. You should only pay 5.8% of that selling price "Total Consideration Given" to your County Clerk when you register the car. Talk to your County Clerk in advance before having the dealer complete
Ky Revenue Cabinet form 71A100 Affidavit . You still will pay Kentucky Income Tax on this prize.

Miki
January 1st, 2007, 4:23pm
Yes, yes, yes! Claim fair market value for the car, not the ARV listed. As long as you could prove the FMV.

I had to pay almost $3,000 up front for the mini cooper last year. Luckily with all of our deductions we evened out on the federal. Normally we get a couple thousand back but, last year we didn't get squat. Well, maybe $100 can't remember.

Congratulations!