have some other info. under current tax law. the trade-in value does not reduce the cost of the new vehicle. rather it is treated as sales proceeds of the old vehicle. you have provided no info on it. so whether any of that is taxable depends on what you deducted for tax purposes for depreciation or mileage.
One way to handle trade-in value received when the usage of the vehicle was part personal and part business.
- Prorate the original cost based on mileage
- Allocate the trade-in value the same way
- Compute gain or loss on personal portion. Loss is not deductible. Gain is taxable
- Reduce the business portion of the original cost by the depreciation taken or use the depreciation included in the standard mileage rates. Depending on the methods you used each year. For the depreciation included in standard mileage see IRS PUB 463. Do not reduce the business portion below zero
- Any loss is deductible. Any gain is taxable as ordinary income not to exceed the depreciation taken. Any excess gain is capital gain. This assumes the vehicle was held for more than 1 year. Otherwise, all gain is ordinary.
