I am considering selling my vehicle but I am concerned with the tax implications of the timing of the sale.
Vehicle was used 80% for business in 2024 and will be 80% for 2025 if I keep it to the end of the year.
Original purchase price was $54,875. I did not take bonus or 179 deduction. Using 5 yr MACRS.
2024 depreciation was 20% per MACRS ($10,975) multiplied by 80% = $8,780
2025 depreciation will be 32% per MACRS ($17,560) multiplied by 80% = $14,048.
If I decide to sell the vehicle in January of 2026 and trade in for a new vehicle, I am concerned about using the right numbers for the calculation. If a dealer offers me $36,000 for my vehicle is the calculation as follows:
$54,875-all depreciation ($22,828) = $32,047 basis
$36,000 sale -$32,047 = $3,953 gain
Or do I multiply either of those numbers by 80%?
I want to know the right formula because I feel if I wait another year and take another approx $8400 in depreciation and then trade in for say $34,000, the spread becomes even greater resulting in a bigger tax bite.
Is that correct or am I calculating incorrectly? Any help is greatly appreciated.
