Sale of Business Property and Disposition on a total loss vehicle

[zbchristy501]

I was involved in a not-at-fault accident which resulted in the insurance declaring my vehicle a total loss in 2023.  I used this vehicle for both personal and business use since 2019.  The insurance company paid off my lender and sent me a check for the rest.  I used some of that money towards the purchase of another vehicle that is also being used for both personal and business use.  I have used the Standard Mileage deduction every year.  

Because my business mileage varied over the years, I'll pulled my old records/returns to verify previous mileage to determine by Business Portion Percentage (44.78%).  So, my confusion comes when TT asks for the Business Portion of the Sales Price and Expense of Sales.  I've read a couple of different answers so I'm not sure if I'm supposed to use the insurance reimbursement amount (business portion) or the original purchase price (business portion).  Expense of Sales?   When I get to the Vehicle Total Cost am I correct to think that I need to take the original purchase price and multiply it by 44.78% to get the business portion?  

[PatriciaV]

Yes, you are correct. Use the business use percentage to calculate both your remaining basis in the vehicle and the portion of the insurance proceeds as the "sales price." You should have no expense for the sale.

Here are additional instructions on how to calculate the amounts to enter:

Report the business portion as a sale on your tax return. The IRS requires the insurance proceeds be listed as sale proceeds.  If another car was purchased with the proceeds, it's not important unless you will also use the new car in your business. You will need the purchase price of the new vehicle.

A car that was previously used in business require some figures you need to determine before you can add or enter the sale.

1. If you purchased your car, find the amount you paid for this business car after any trade-in allowance, if applicable.
2. What was the percentage of business use and personal use (if applicable)? Only the business portion of sales price and original cost will be used.
   • This is determined by total business miles divided by the total miles driven each year.
3. Did you depreciate the cost of the car or did you use standard mileage rate?
   • If you depreciated the car in TurboTax then it should still be there and you will mark that it was sold.  TurboTax will walk you through the sale.
   • If you used the standard mileage rate you must follow the chart shown below to calculate the amount of the depreciation portion (part of the standard mileage rate is the depreciation expense). Miles x rate = depreciation, then total for all years.

Now that you have the necessary figures, you will be prepared to handle the sale.  In the vehicle section/expense under the business be sure to answer all the questions starting with the Let's get some info about this vehicle. 

• IRS Publication 463 (page 35)