Question

When I sell my business vehicle (sole proprietor) do I have to pay recovery tax if I claimed mileage deduction on it for 8 years? What if I claimed actual cost?

Forum|Forum|3 years ago
July 20, 2022
2 replies
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TurboTax Self Employed Online

Part of the standard mileage rate used each year includes a portion for depreication just like the actual expenses has depreciation or a 179 deduction. So when you sell a business use vehicle you need to report the sale and recapture any depreciation if needed.

J

jhalla2jAuthor

Thank you! I had read that once the business vehicle reaches it's "useful life" (i.e. 5 years for a vehicle) then I simply need to record the sale as $0 and don't have to pay any recapture taxes. Is that correct? Thanks again.

Critter-3

If the business asset is fully depreciated then any amount you get for the vehicle is all taxable as ordinary income because all of the sale price is recaptured depreciation. And depending on the use over those 8 years ( using the standard mileage rate) you may not have fully depreciated the car. If this was part personal and part business then more calculations are needed.

M

Mike9241

see IRS PUB 463 page 24 for the depreciation amount per mile for each year

https://www.irs.gov/pub/irs-pdf/p463.pdf

whether you used actual costs and took depreciation or used the standard mileage which includes depreciation there can be recapture.

you need to determine the basis of the vehicle which would normally be what you paid for it less the depreciation. if you sold it for more than that, you have recapture. if less, you have a deductible loss. this assumes 100% business use. different computations would be needed if there was personal use.