@markorec wrote:
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%?
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.
The year you take it out of service you only get a half-year of depreciation. If you take it out of service in 2025, you will only get $7,024 of depreciation. If you take it out of service in 2026, you'll get $14,048 of depreciation for 2025 and $4,214 in 2026 (based on exactly 80% business use).
$54,875 x 80% = $43,900 business basis
$43,900 - $27,042 depreciation = $16,858 Adjusted Business Basis
$36,000 x 80% = $28,800 Business Sale Price
$28,800 - $16,858 = $11,942 taxable gain
However, when you refer to a bigger "tax bite", are you meaning that is a good way or a bad way? The additional depreciation is either neutral or is HELPING you. You are getting a deduction for that depreciation, so paying the recapture when it sells is just breaking it even. Or if this is a Schedule C business, you are getting a deduction for BOTH income tax AND Self-Employment Tax, and then selling it is only increases income tax (no effect on self-employment tax).
