Do You Have to Pay Taxes on Your Personal Use Property
When you own personal items you consider them as your personal property and don’t even think there could be any tax implications regarding them if you were to sell or dispose of them. This is one area of tax that a lot of people get confused about.
In many cases the property may be cars or boats, and although there could be a capital gain realized most often there isn’t because this type of property loses its value over the years rather than gains it. Ironically if you do end up with a capital gain you are going to have to claim it, yet if your disposition of it results in a loss then in most cases you cannot claim the loss. This is because most likely the depreciation is as a result of personal use so it’s really a personal expense that does not apply.
There may be exceptions to this if the property in question happens to be listed personal property, or it involves a bad debt to which there are specific rules and regulations that apply to both of these instances.
The big difference here is that that although listed personal properties are still personally owned they tend to increase in value as they age. Some examples of this would be some forms of art, jewellery, stamp or coin collection, or perhaps rare books.
The laws surrounding capital gains and losses are complex in general, and these are really something that you would want to let your accountant handle in regards to your tax matters concerning these. All too often when it comes to mistakes being made on tax filings it is within this area of the tax obligations.
The personal property items can be quite extensive and they can include not only the vehicles and boats we mentioned but other personal items like your furniture or even your cottage.
If you have a bad debt situation that you are realizing a loss on then you really need to understand the tax laws related to this. It is complex and includes the regulations regarding arms length transactions. Again it is a matter that you may want to let a qualified accountant handle.
Many times individual tax payers feel that their personal tax obligations are simple and they can complete the returns for these themselves. If they are very simple and straightforward tax requirements for filing then this may be true. However, anything that falls out of the very basic tax filing obligations for the personal tax payer, it is well worth obtaining the help of a tax professional, and one that is qualified to complete your taxes for you.