We remember the soaring price of “minounes” during the pandemic in the absence of products in the yard of car dealerships. You may have taken advantage of this by reselling your old mount at a profit. Better report the gain on your tax return, because the taxman knows.
This is all the more essential since the tax preparer is likely to forget to ask you if you sold a car during the year, since this type of transaction, historically, has no impact in tax terms. But last year was an exception.
“It would be the kind of thing where I would do a text in a newsletter that I would send to my clients. I would say to them: be careful, it is applicable this year, ”says Nicolas Godbout, tax specialist at Effisca.
Consider a typical case: the motorist whose rental contract expired in 2022. Last year, the residual value of the vehicle entered in the contract was systematically lower than its market value.
The motorist thus had the opportunity to buy back the car at its residual value and resell it at a profit on Marketplace or autoHebdo.net. The chances are that the two transactions occurred simultaneously at the registration office of the Société de l’assurance automobile du Québec (SAAQ), in which case it is akin to a “flip”.
For an individual who is not in business, the car is property for personal use. Friendly reminder: a loss on the resale of property for personal use is not deductible from your income, nor can it reduce a gain made on another personal property.
While the loss is not deductible, the gain from personal property is still taxable at 50%.
“I make a profit on a tank which I bought and used just for personal purposes. The profit is taxable, unfortunately,” confirms tax specialist Sébastien Hamel, CPA, at Panorama corporative taxation.
Clarification: if the proceeds of the sale are $1,000 or less, there is no tax consequence, because there is a presumption that the base price of the property is $1,000.
“We simply want to remind you that Revenu Québec has all the information required to play tricks on those who have taken advantage of the soaring prices of used cars and who would have the idea of not declaring anything to the tax authorities”, points out keeps the Quebec Tax Training Center (CQFF) in its course on New for tax declarations of the year that The Press followed last February.
The SAAQ gladly exchanges information with Revenu Québec.
Since the SAAQ collects the Quebec sales tax on the sale of used vehicles, it is easy for the tax authorities to know the date of purchase of the good, the date of sale and the price paid on each occasion.
As proof, owners of trailers, which are registered in the same way as cars, have been assessed by Revenu Québec after having sold their house on four wheels profitably, underlines the CQFF.
Worse, the CQFF does not exclude the possibility that Revenu Québec considers car flips as 100% taxable business income and not as a 50% taxable capital gain “depending on the intention of the individual or the speed at which the car was sold”.
” It’s the fun to scare the world. Theoretically, all that is true, agrees Sébastien Hamel. When you bought out your lease, what was your intention? But I can’t believe the Revenue is going to go into that. »
Tax expert Nicolas Godbout doesn’t believe it either. “To determine business income versus capital gain, there are criteria to consider. One of the things that the tax authorities will look at is the frequency of transactions. Do you resell cars often? »
Be warned, however.