rental property - disposition of vehicle

[coloradokat]

I use a personal vehicle for our rental properties.  I don't write off the purchase of the vehicle to any of our rental properties.  I only write off the mileage driven that are specific to the rental properties.  In 2023 we sold the vehicle and replaced it with a different one.  Since I didn't list the vehicle as an asset thus never depreciating it, can I leave the purchase price and the sales price blank?

[DianeW777 · Accepted solution]

No. You have a taxable event for the vehicle sold because the standard mileage rate (SMR) has a depreciation component.

1. Total all of the business miles for the life of the vehicle
2. Total all miles on the vehicle for the life of the vehicle
3. Business miles divided by total miles = Business Use Percentage for the life of the vehicle
4. Take the original cost of the vehicle x the business use percentage = Business Cost
5. Take the sales or trade-in price x the business use percentage = Business Sales Price
6. Calculate all of the business miles by year with the rate in the SMR for depreciation (chart attached) to arrive at the total depreciation considered used by the IRS.

Next enter your Sale of Business Property

1. Wages & Income at the top
2. Scroll down to Other Business Situations
3. Select Sale of Business Property
4. Select Sales of business or rental property that you haven't already reported.
5. Answer 'Yes' to Do all of the following apply...?
6. Enter your sales information, do not make an entry for depreciation (no zeros)
   1.  Description of the Property (Second Home/Previous Rental Home)
   2. Sales Price/Sales Expenses 
   3. Date acquired and date sold
   4. Sales Price
   5. Cost
   6. Depreciation

[coloradokat · Accepted solution]

thank you so much for this.  does this apply to any percentage of business use?  I was reading somewhere that it only applied to 50% or more business use of a vehicle and my business use is only at 31%.

[DawnC · Accepted solution]

Yes, no matter what business percentage it was, the depreciation has to be recaptured when you dispose of the asset.