Yes, there is what is called "Depreciation Recapture".
This means that if the asset (thing/ truck) that you are depreciating (because it is loosing value over time as it gets older) ends up NOT loosing that value, you have to "pay back" the depreciation the IRS gave you.
Working with the numbers you gave,
your basis for the truck was 3,100 which was your cost.
When you take Standard Mileage, part of that Standard Mileage includes "Depreciation Equivalent"
Depreciation is the amount you can take each year as a deduction to correspond for the reduction in value.
So for every business mile you drove in 2020, .27 is this depreciation equivalent.
Every business mile you drove in 2021, .26 is this depreciation equivalent.
Every business mile you drove in 2022, .26 is this depreciation equivalent.
So to figure the depreciation you took, multiply the mileage used those years to each rate, and then add them together.
To result in more than 3100 depreciation, you would have had to use the truck for around 11, 000 miles.
(Remember, these are BUSINESS miles only)
Ok, so far we had a truck that cost you 3,100 and you took (at least) 3,100 in depreciation over the years, so now it's as if you paid zero for the truck, because you got to expense it all.
The 2,000 in repairs you mention should have been expensed the year you paid for the repairs.
Now the truck that you have zero investment in is totaled and the insurance guy gives you 7,100.
Your "Adjusted Basis" is zero (cost less depreciation) (3,100 - 3,100)
You didn't lose any value when the truck was totaled. It had no value left "on the books".
You got 7,100, so you made 7,100.
(You say it was adjusted to 6,450 for the percentage it was used for business, but that other 650 should be personal capital gain also.)
First you need to "pay back" that 3,100 the IRS "gave you" in Depreciation Equivalent.
(This should be reported as Ordinary Income) on Form 4797 and flow to Schedule 1 line 4.
The rest is Capital Gain and should be on Schedule D
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
