Follow along and let us know if you need any help in the comment section.
You are disposing of an asset (getting rid of your vehicle) and depreciation was taken. The IRS wants to know that you are no longer using the car for business.
There are two ways to handle this. You can figure a taxable gain or loss on the vehicle or you can delete it from your business expenses.
1. If you did not use the vehicle this year and plan not to use it again, you can tell TurboTax that you disposed of the vehicle, even if you just stopped using it. You would then answer the prompt for sales price as being $0. This is what TurboTax instructs you to do.
· Continue through the prompts for the vehicle.
· TurboTax asks for the sales price (which was $0).
· TurboTax asks for what you paid for the vehicle. Calculate the basis of the vehicle. Remember that you received an insurance reimbursement.
· You may end up with a gain (or loss) on the disposition of the vehicle. A gain (or loss) is calculated even though you chose to stop using the vehicle.
· See IRS Publication 463 Transportation for additional information on the Disposition of a Vehicle.
2. You can just delete the vehicle:
If you are Self-employed (Schedule C):
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If you were using the vehicle as part of your Business, then click on the Business part of your return, hit Review/Update.
- Scroll down to Business Expenses and click on the Business Vehicle Expense item of that section.
- On the Vehicle Expenses Summary page, you can Delete your vehicle. That will also delete the worksheet associated with that vehicle.
