Traded a 2020 Tesla Y used for business end of Dec. 2023 and traded for a new 2023 Tesla Y

[CaptainJJ]

Having some difficulty completing the business income and expense section for the trade transaction of the 2020 Tesla Y.  I traded the vehicle for a new one 12/23/2023 and took delivery of the new on which I also used to the personal business.  So I've checked th "stopped using the Tesla for business on 12/23/2023" On the sales price I've indicated a trade in value (92.43% business use actual trade credit). Turbo tax entered the basis for gain or loss at (based on 2022 depreciation allowed) resulting in a $14181 trade gain considered taxable income.  

I just want to make sure I followed proper procedures because previous years you would enter the trade in value when you entered the new vehicle numbers.  

Also when entering the information on the new Tesla there was no question asking if I would like to take a Section 179  special depreciation.  

[RobertB4444]

You entered everything correctly.  The price you paid for the new car includes the trade in value.

You may not qualify for a section 179 deduction.  It depends on a lot of things most especially your income.  If accelerated depreciation is an option then it should be offered to you by the system.

@CaptainJJ 

[CaptainJJ · Accepted solution]

Thanks for your prompt answer.  When I started working this year's taxes TurboTax offered the accelerated depreciation but afterwards this disappeared.

Can I include the new Tesla Y under Business Assets Summary under the tools and machinery description, and take the 80% special depreciation allowance?  I've studied this rule and don't see any reason not to.  I also used it previous years when I had an aircraft I used for my business.  

[KrisD15]

To clarify, are you getting a Clean Vehicle Credit?

That would be on Form 8936. 

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[CaptainJJ]

Yes, I am.  But believe that form is not available in Turbo Tax. Understand it will be available Feb. 21?

James

[RobertB4444 · Accepted solution]

Your system may be waiting for that form then.  You can qualify for both the increased depreciation as well as the clean vehicle credit but both are nonrefundable credits so they are limited by your tax liability.  If the combination of the two has reduced your tax liability then the additional depreciation deduction may be disallowed.

@CaptainJJ 

[AmeliesUncle]

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@CaptainJJ wrote:

On the sales price I've indicated a trade in value (92.43% business use actual trade credit). Turbo tax entered the basis for gain or loss at (based on 2022 depreciation allowed) resulting in a $14181 trade gain considered taxable income. 

TurboTax does NOT calculate the gain/loss correctly if the business percentage varied from year to year.

You would need to say it was converted to personal use (or "Special Handling" screen, say "yes").  Then report the sale in the "Sale of Business Property" section.  But you will need to MANUALLY do some of the calculations.  And reporting it there may not correctly affect some things on your business (such as QBI and Home Office income limitation).

So you may consider going to a tax professional this year.