Sale of a car used in business

Forum|Forum|1 year ago
February 22, 2025
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I sold my car in 2024 and received a $9,000 Trade-in Allowance, which was applied to Lease Payments for a new leased car. The cost of my old car was $53,390.91, used on an average for the past five years of 37% in business. The IRS Depreciation since 2014 (when I bought the car) is $17,540.82. I calculated the adjusted basis as follow=: $53,390.91 x .37=$19,952.18 (cost per Business Use) Less: Accumulated Depreciation of $17,540.82=$2,411.36. I received $9,000 for the old car. I think I would report a gain of $951.94. $9,000x.37=$3,3363.30 less Accumulated Depreciation of $2,411.36). Or, because I did not have 50% Business Use, I should report a gain of $9,000. Help in determining what I should properly report would be appreciated.

LM--2025

KrisD15

Using your numbers, I get 919 as Depreciation Recapture

9,000 x .37 = 3,330

3,330 - 2,411 = 919

That all sounds good, my only question would be why the depreciation is only 17,541 if it was used five years, but perhaps it was not five full years and therefore not fully depreciated.

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LM--2025Author

Thank you, Kris, for replying!

The rate I used is the depreciation portion of the standard mileage rate. Also, the car's business use dropped quite a bit in the past three years. The car was used for business for a total of 12 years. The total miles were 70,184. and the IRS depreciation I calculated is $17,541. (example Year 2020. Rate: $.27 Business Miles 4,570 = $1.234). Can you tell me what I may have done wrong here?

You are correct. I multiplied a percentage rate of 37.37% to the trade-in allowance, rather than 37%.

I've entered the figures into Turbo Tax. , which shows I have to report an ordinary income gain of $2,411 and a long term gain of $919 (Total $3,330.) Does this sound right to you?

LM--25

DianeW777

Yes, you are right. The full amount of business use standard mileage rate (SMR) is used in your formula to arrive at taxable gain. Business use numbers below:

Cost: $19,952
Depreciation (SMR portion) $17,541
Sales Price: $3330
Gain = $919

Be sure to mark the vehicle as converted to personal use.

Next enter your Sale of Business Property

Income at the top
Scroll down to Other Business Situations
Select Sale of Business Property
Select Sales of business or rental property that you haven't already reported.
Answer 'Yes' to Do all of the following apply...?
Enter your sales information, do not make an entry for depreciation (no zeros)
1. Description of the Property (Vehicle made/model/year)
2. Sales Price/Sales Expenses
3. Date acquired and date sold
4. Sales Price
5. Cost
6. Depreciation