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Self employed
Not quite.
In TurboTax, you will enter the full amounts of the actual expenses.
Next, you will enter the total mileage driven and the business mileage. This gives TurboTax the percentage it will use for the expenses.
So, if you use actual expenses and paid $100 for an oil change, 10,000 total miles, 9,000 business miles, TurboTax will list $90 for an expense.
ADDITIONALLY, you will need to enter a value for the vehicle. The 1,000 in taxes and fees is added to that value. So, if you purchased the vehicle (bought out the lease) for 20,000, the basis (your cost) is listed as 21,000.
If you bought out the lease before using it in your business, simply add it to the business section (Schedule C).
If you used the leased vehicle in your business, you must select that it was converted to personal use to get it off the books.
You will enter this same vehicle as if it was just purchased and new to the business the year you bought-out the lease.
Any depreciation taken for business use when it was leased will lower your basis for the "new" vehicle.
Depreciation is taken as depreciation when using actual expenses and as "depreciation equivalent" when using Standard Mileage Rate. If you used actual expenses, the depreciation is listed on the deprecation report or Form 4562.
You'll need to add the amounts used in previous years to the 2023 depreciation. Subtract this amount from the "new vehicle". So again, if you bought-out the lease for 20,000, paid 1,000 taxes and fees and took 2,000 depreciation, your basis is 19,000.
If you used Standard Mileage in previous years, add up the depreciation equivalent (page 35) and subtract that from the value to get to your basis. The depreciation equivalent is built into the Standard Rate, .28 per mile for 2023.
You need to keep track of the depreciation year after year when you use it as a business vehicle as that will be needed when you sell it.
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