Can't file my return because of depreciation issue on vehicle sold that was used for our rental duplex

[saschroeder]

Hi, We own a duplex... we rent half and live in the other half. We sold the vehicle that we used personally and for the rental property. My return through Turbo Tax won't file because of an error related to depreciation allowed for the vehicle. I get an error saying the depreciation allowed or allowable is too large. The original purchase price (basis) for this 2008 Ford Taurus was $10,000, with business use for this year at 6.94%. (The % of time used for business has varied over the years.) We sold the car to the junk yard for $700. The depreciation amount (calculated by TurboTax from previous years) is $1097. What should I enter to get my return to be acceptable?

[DianeW777]

Yes, report the sale as follows.  First you will remove the vehicle by converting it to personal use. Follow all the instructions below.

The way to report the sale (trade is not really recognized by the IRS any longer for equipment or vehicles) is as follows. You have all the records so it should provide you the detail to move forward.

1. All business miles for all years and then total miles for all years - divide business miles by total miles to arrive at your overall business use percentage for the life of the vehicle. You will use this percentage times the selling price (or trade-in value) $700, to arrive at the business selling price. Use the same percentage to arrive at your business portion of the cost before depreciation. 
2. Calculate the standard mileage rate (SMR) depreciation portion for the business miles each year or the actual depreciation expense you used for the vehicle
   • The standard mileage rate has a depreciation component (see below if you did  use the SMR)
3. When you enter the vehicle information in your rental be sure to select 'Sold, disposed of, etc....' then do not indicate it was sold.  You must say 'Yes' it was converted to personal use.  This will eliminate any sales information in the vehicle it self.
4. Once you have completed the information in that section you will follow the steps below to enter your sale:
   1. Go to Less Common Business Situations
   2. Scroll to Sale of  Business Property
   3. On the next screen select Any Other Property Sale
   4. Use the information from step one and the depreciation from step 2 to complete your sale
5. If the personal portion of your vehicle is a loss there is nothing to report for that portion of the sale/trade.

This completes your entry for your vehicle.  Please update here if you have more questions and one of our Tax Experts will help.