There is no taxable event on the trade-in. The cost basis of the new car is reduced for the depreciation used on the old car. To do that, there is a part of the standard mileage rate that is considered the depreciation. Multiply that rate times the business miles each year to arrive at the depreciation used as a deduction on the tax returns. Then take that total and reduce the cost basis of the new are (first by the trade-in then by the depreciation).
Rate of Depreciation Allowed in Standard Mileage Rate
Year(s) Depreciation Rate per Mile
- 2019 $0.26
- 2018 $0.25
- 2017 $0.25
- 2015–2016 $0.24
- 2014 $0.22
- 2012–2013 $0.23
For more information, please see IRS Publication 535
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