Deductions & credits
You report it 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.
A car that was previously used in business require some figures you need to determine before you can add or enter the sale.
- If you purchased your car, find the amount you paid for this business car after any trade-in allowance, if applicable.
- What was the percentage of business use and personal use (if applicable)? Only the business portion of sales price and cost will be used.
- This is determined by total business miles divided by the total miles driven each year.
- 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 attached to calculate the amount of the depreciation portion (part of the standard mileage rate is the depreciation expense).
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 24)
