Cant grasp vehicle depreciation for business

[Mike92ct]

I'm curious on an estimate my vehicle will have for my business for taxes.. The vehicle is used 85% for business. I've owned it since 2018 it's a 2016 f150. My business only started in 2021 and was in use all of 2022. I understand my expenses for the vehicle but depreciation I can't grasp how it effects a not new vehicle that I purchased before... I understand the mileage option maybe easier but I need this value first to compare.  Plus, I can include more expenses VS the mileage one. My mileage for business use in 2022 is approx 9,000.

My truck is financed

[Mike9241]

when you convert a  personal asset to business use the tax basis for depreciation is the lower of its adjusted basis (probably cost if never depreciated in earlier years) or fair market value on the date it was placed into service for the business.

there are numerous websites where you can get an estimate of FMV.  make sure you take into account the condition of the vehicle. 

[Mike92ct]

OK thank you. 

So if at beginning of 2022, let's say my FMV of the truck is $22,000. I use it 85% for business. 

So I can then use the 5 year table to use each year accordingly,  first year being 35%. That comes out to about $6,600. Plus other expenses. This is rough but is that the gist of it.....

[AmeliesUncle]

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@Mike92ct wrote:

My business only started in 2021 and was in use all of 2022.

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Was the vehicle used for business in 2021?

If so, how was the vehicle reported on your 2021 tax return?

[Mike92ct]

Well.. I took nothing.  The date I've been using was November 25th 2021. And I did little driving but made many purchases.  I am trying to amend my 2021 taxes to recapture somethings I overlooked but the turbotax online is broken....already called tech support and even they are puzzled. Said wait a week...

[AmeliesUncle]

Because you did not use the Standard Mileage Rate by the due date of your 2021 return, you no longer have the option to use the Standard Mileage Rate (however, if you filed an extension for 2021, you may still have the option if you follow certain procedures).

And 2021 is year 1 for depreciation.  So your 2022 return will show the second year of depreciation.

As for TurboTax online, I don't think it is able to do 2021 returns anymore (I think it shut down in October).  I think if you use TurboTax, you can only use the CD/downloaded version now.

[Mike92ct]

Thanks, that does make sense about my technical issues. I will look into the desktop version. 

the reason I was amending was (to best of my knowledge) to claim some of my early business purchases.  I was unaware the loss would offset my other/wifes income. I believe the equipment falls under a 179 deduction and it deducted the entire purchase around 12K. Which resulted in an additional refund of $1,400. I did not even mention the truck in the amend. and in all seriousness, the truck was not really in "service" until 2022 for the business, 2022 was my first income, not 2021. 

Every article on vehicle tax deprecation always refer to " a purchase" or a vehicle that was not already owned, so the process seems trickier on top of just being new to me in general. 

[AmeliesUncle]

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@Mike92ct wrote:

the truck was not really in "service" until 2022 for the business, 2022 was my first income, not 2021. 

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If your business was 'open' (ready and available for business income) and you used the vehicle, it WAS in "service" in 2021 and that is when the depreciation starts.  If your business was not 'open', then you can't take ANY business expenses on your 2021 return.