That is correct. If you've been using that vehicle for 100% business use since 2004 (that's 16 years) then there's no question that it has been fully depreciated, even with the standard mileage rate if you took the per-mile deduction each year. Therefore the cost basis of the vehicle is $0. So if you sell it for any price, the full amount you sell it for is taxable income in the tax year you sell it.

So what this amounts to, if you originally purchased the vehicle for say, $20,000, over the course of 16 years you have fully deducted that $20,000 from your taxable income. Now you sell it for $1,500 and you only pay taxes on that $1,500. Sure beats paying taxes on the entire depreciation recapture of $20,000.

Thanks for the reply - but it seems I am being charged tax on the entire recapture. Do I change the cost basis to $0?

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@tlee07 wrote:

Thanks for the reply - but it seems I am being charged tax on the entire recapture. Do I change the cost basis to $0?

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I don't understand your question.  If you entered a basis of $15,000 and a sales price of $1500, you have a loss.  Your basis should be $0 and your sales price is $1500, which is $1500 of taxable depreciation recapture, but the tax on that should be no more than your marginal rate or 25% whichever is lower.

If you can manually enter your basis instead of calculating it, it would be zero at this point.