How do i calculate depreciation equivalent?

[DawnC · Accepted solution]

The depreciation equivalent for total miles is a small portion of depreciation that's included when using the standard mileage rate for the business use of your car.  When you claim the standard mileage rate when deducting your business car miles, you have to account for 'depreciation equivalent' when you dispose of the car. 

The IRS provides a table with the depreciation equivalent rate under "Rate of Depreciation Allowed in Standard Mileage Rate" on page 23 of the 2018  Publication 463, Travel, Gift, and Car Expenses.  If you'll see the example on page 24 of the publication above, you'll see how the depreciation equivalent is figured.

That rate is .26 for 2019 - see 2019 Standard Mileage Rates

[hirenshashi]

Do I need to go back and calculate this for every single past year on the car or is there an easier way of calculating this? 

[JamesG1]

Yes, you calculate the depreciation equivalent for every year that you claimed the standard vehicle mileage for the vehicle that has been disposed.

If you had claimed actual expenses, you would have reported the depreciation deduction for the same vehicle.

For instance, if you had claimed 1,000 miles in 2018 times the depreciation rate per mile is $.25 per mile equals $250.

The table of Rate of Depreciation Allowed in Standard Mileage Rate is on page 24 of this IRS publication.

[hirenshashi]

OMG - this is a 2008 car so I’m going back 11 years in my tax files to look up the miles used and calculate for each year?  Holy moly...

[WileyWon]

That's nuts!! 

So, if I used a car for business 10 years, I have to manually calculate the Depreciation Equivalent X the number of miles for that year X the business percentage for that year?

Here's a really good question ....

I used TurboTax for all 10 years.   Why weren't these numbers tracked by TurboTax?

And, what to do if the vehicle was used in two different businesses over those 10 years?

[Anonymous]

that's not exactly how depreciation is calculated. it's the business mileage each year times the portion of the standard mileage deduction that is depreciation as provided for in PUB 463 page 24.  

can't answer why TT doesn't track this but various pro software I have used over numerous years doesn't track it either. 

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

[Carl]

See https://bradfordtaxinstitute.com/Free_Resources/IRS-Mileage-Rates.xml.aspx and scroll about 2/3's way down that page to see the amount of the per-mile deduction that is depreciation for each year back to 2003.