sale of vehicle during tax year which was used occasionally for business

Forum|Forum|4 months ago
March 8, 2026
2 replies
206 views

Hello. So here's my situation. I started using my only auto in 2023 for a side hustle business. I've tracked my business miles each year and have used the standard deduction. I traded the car in in 2025. I'm using the turbotax desktop software home and business. Near the beginning it asks for info about the vehicle. One question is if i stopped using the vehicle in 2025, and when I sold traded it in, gave away, or stopped using it. I select the box and enter the date i traded it in.

I then go through and enter all the relevant info for the mileage, ect. It then asks if any of the following apply:

[you started using it as a personal vehicle 100% of the time at any point in 2025]

[your percentage of business use of the vehicle varied over the years]

[you gave it away as a gift . . . ]

[none of these apply]

In looking at my past tax returns, my percentage of business use has varied slightly (6.16%, 15.33%, now 10.55%). So I assume I must select the varied use box (not sure how anyone would ever not have a varying percentage over the years). When I select the varied use option, it then asks if I converted the asset to non-business use. It states something about reporting "recapture" (whatever that is) if I did convert it to non-business use. I assume thought that I am to select no?

It then asks for the business portion of the sales price, which it explains is normally the percentage of business use times the sale price. This is the first place that I am really stuck (unless I chose wrong somewhere above). In the explanation/instructions it is noting the 10.55% (for 2025). However, I assume that since I checked the varying percentage option earlier, that I have to do some sort of different calculation? If so, how? If I was to average the business use percentage for 2023-2025, it would be 10.68% (almost the same as the 10.55% for this year). What do I do here? My guess is to average the 3 years and take that percentage times the trade in price?

It then wants the fair market purchase price of the car when it was placed into business use (yikes!). Ok, I can google that and get an estimated fair market value at that time. But... do I really need to do all of this? It seems like i'm going down an unnecessary rabbit hole. Why does any of this matter when I took a standard deduction each year? Am I on the right track here with what I typed above? Thank you so much!!

TurboTax Home & Biz Windows

AmyC

Level 15

Your logic is sound so let's go through what you really need and why. Items sold at a gain for personal use, are taxable. Personal items sold at a loss are not deductible. Business items create a gain or loss regardless. Your car is part personal item and part business item. I am going to assume that you sold the car for less and lost money on the personal side. For the business side:

The percent business use, basis, depreciation and sales price are needed to determine if you have a business gain.

Business use percentage: total miles driven for business divided by total miles driven = business percentage for time in service.
Your basis: lower of cost or fair market value when converted to business use times the business percentage.
Depreciation. The standard mileage rate includes a portion for depreciation.
1. Use your 2023 business miles x 0.28 (standard mileage of 65.5 cents)
2. Use your 2024 business miles x 0.3 (std is 67 cents per mile)
3. Use your 2025 business miles x 0.31 (70 cents per mile in standard)
4. Total the 3 years of depreciation from the standard mileage rate
Sales price is total sale plus expenses x business percentage

When you go through your return, you will see the sale on Form 4797 gain in Part III, review lines 19-25 and a loss is reported in Part I (since you held it over 1 year).

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KR202526Author

Level 2

Thanks for the reply Amy, I greatly appreciate it. I've worked through the section of the turbotax software, and I have reviewed what you provided. When you talk about my "basis", you mention "fair market value when converted to business use times the business percentage". The software is asking for the fair market value when I placed it into service. But it is not telling me to times it by the business percentage. Would it be doing that automatically for me in the background?

The end result of this section's calculations is that I have a gain of $1,820. I really don't understand how I could have such a huge gain. Is this saying that the depreciation I've received for 2023, 2024, and 2025 that was contained in my standard milage deduction is $1,820 more than..... something? More than what? The total depreciation contained in the standard mileage deduction is only $167 (2023), $1,444 (2024) and $979 (2025), for a total depreciation of $2,590. How can $1820 of that be extra depreciation I wasn't entitled to? Does something seem wrong?

Thank you again!

DianeW777

Level 15

No, you must enter the business portion of the fair market value (FMV) when placed in service, TurboTax will not calculate this for you.

Once you have gathered the information detailed for you by our tax expert @AmyC, in the vehicle itself you do want to say it was converted to personal use. This stops TurboTax from carrying it forward to the future. The varied business use can make it complicated when sold.

Next, you will enter only the sales information using the steps below.

Once you have completed the information in the vehicle section you will follow the steps below to enter your sale:
1. Go to Less Common Business Situations
2. Scroll to Sale of Business Property
3. On the next screen select Any Other Property Sale
4. Use the information from step 3 and the depreciation from step 6 to complete your sale
5. Select Sales of business or rental property that you haven't already reported.
6. Answer 'Yes' to Do all of the following apply...?
  1. Description of the Property (Vehicle make/model/year)
  2. Sales Price/Sales Expenses
  3. Date acquired and date sold
  4. Cost - business portion of FMV
  5. Depreciation
If the personal portion of your vehicle is a loss there is nothing to report for that portion of the sale/trade.

Annual Depreciation Component Breakdown (Standard Mileage Rate IRS Pub 463)

@KR202526

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AmeliesUncle

Level 15

@KR202526 wrote:
I started using my only auto in 2023 for a side hustle business.

The short answer is that TurboTax does not handle your situation and you should go to a good tax professional that knows how to handle it.

Even if you report the correct amounts under the "Sale of Business Property" section, it still often has wrong results. Even though it may report the correct gain/loss (if you do it correctly, see my comment later), but it may wrongly be NOT affecting the QBI deduction when it should, and could wrongly not affect other items as well (for example, the Home Office limit).

If you owned your vehicle for personal use before you started using it for business, the prior comment about using the Fair Market Value and the average business percentage since it was converted to partial business use is mostly wrong.

You start off the calculation with the COST Basis (purchase price) and the average business percentage over the LIFTEIME you owned the vehicle. If the results in a gain, then that calculation I just mentioned is what you need to use (if that calculation results in a LOSS, then there are more calculations before the final result).