I had a 2014 car that was placed in service in 2017, when I became an independent contractor. I always took the mileage deduction. In 2024, I bought a new car and gave the old one to a family member. I have the original purchase and FMV for last year. I entered the info in the car section of expenses in Sch C. I ended up with a credit deduction of the difference between the price and FMV. I'm not used to nice surprises from the IRS. Please tell me exactly how this info should be entered and it is subject to depreciation recapture? Thank you.
This should be entered as a sale or disposal of the vehicle for zero dollars. You shouldn't be receiving a credit from the IRS for this sale, unfortunately. On the upside you also don't have any depreciation recapture.
But clearly something has been entered incorrectly here. You're going to need to go back through the sale and enter the correct information so that the system gets it right. You can't tell the system that you made a gift of the car. If you do that it thinks you mean charitable gift. And while I'm sure your family member is nice they don't count as a charity, unfortunately.
You'll need to go back to your schedule C business and click review on the sale of the car. Then go through and make sure the sale shows as zero dollars.