For the gain, in other words the IRS is not going to tax you on gain you didn't actually get. For this reason you are taxed only on the actual gain and in your case it is below the total amount of depreciation expense claimed so it will be taxed at your ordinary income tax rates.
Only the business use portion of the gain is taxable. It is assumed the personal uses portion of the vehicle will result in a loss which is never deductible. However, if the personal use portion actually resulted in a gain that is always going to be taxable under the tax law.
Yes, you use the business use percentage to arrive at the business use sales price, cost basis and then the depreciation you actually used during the business use. (Sales Price x business percentage - (Cost less depreciation) equals gain). If the gain is less than the total depreciation used, it receives ordinary tax treatment.
Cost $2500 x 25% business use cost basis = $625
Depreciation used for rental = $1393 Based on the business miles and standard mileage rate.
Business Cost - $625 minus $1393 depreciation = ($768) below zero at this point so any money received for the business use percentage in a sale is taxable income.
Sales price $400 x .25 = $100 equals taxable gain.
Personal portion: $1875 cost - sales price of $$300 = zero because a personal loss is not allowed under the tax law.
@mnalep
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
