No, do not skip the like-kind exchange questions. The trading in of your car is a like-kind exchange. This will remove the old car, replace it with the new car and carry your basis and depreciation to the new car. Generally,
any taxable gain is deferred from a like-kind exchange. Depreciation is included in the standard mileage rate. See the screenshot below.
If you did not do a like-kind exchange, you would have to tell the IRS that you are no
longer using the old car for business. You would have to report the disposition to calculate and recognize a gain or loss on the old car.
- If
you use the actual expense method to deduct your
business driving, you calculate and separately deduct your
depreciation deduction each year.
- If
you use the standard mileage rate, you get
no separate deduction for depreciation because it is included in the
standard rate. To determine how much depreciation you’ve taken, multiply
the total business miles you drove the car by the amount of the standard
mileage rate that accounts for depreciation.
