Can I keep my car if I owe the IRS?

In most cases, yes. The IRS rarely seizes vehicles because they typically have low equity and the seizure process is costly and time-consuming for the IRS. The IRS allows one vehicle per taxpayer as a necessary expense in their collection financial analysis. The IRS uses the 'quick sale value' (80% of fair market value minus any loan balance) to determine your equity. If your car has little or no equity (you owe more than it's worth or it's an older vehicle), the IRS will leave it alone. When calculating your ability to pay for an installment agreement or OIC, the IRS allows: one vehicle per eligible driver in the household, a monthly car payment (if reasonable), and operating expenses (insurance, gas, maintenance) using local standard amounts. However, the IRS may challenge luxury vehicles or multiple vehicles. If you drive a $80,000 SUV with significant equity, the IRS may argue you should sell it and buy a more modest vehicle, applying the equity to your tax debt. For most taxpayers with average vehicles and normal loan balances, your car is safe from IRS seizure.