Open TurboTax

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
Still need to file? Our experts can get your taxes done right. Get started >
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

cancel
Showing results for 
Search instead for 
Did you mean: 
JT167
New Member

Do we have to pay tax on trade-in value of car used for business?

My daughter used her old car for self-employment (she also has a regular job).  She drove about 1000 miles for self-employment in 2017, about 10% of the total miles driven in 2017.  In December, she traded the old car in.  She got about $1500 on the trade-in.  She has not used the new car for business, but she might at some point this year.  Do we put in $150 for sales price, since it was used 10% for business?  Does it matter what the purchase price of the new car is?  Does she really have to pay tax on the trade-in value?

1 Best answer

Accepted Solutions
DianeW
Expert Alumni

Do we have to pay tax on trade-in value of car used for business?

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  
  • 2017 $0.25  
  • 2015–2016 $0.24  
  • 2014  $0.22  
  • 2012–2013  $0.23

View solution in original post

3 Replies
DianeW
Expert Alumni

Do we have to pay tax on trade-in value of car used for business?

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  
  • 2017 $0.25  
  • 2015–2016 $0.24  
  • 2014  $0.22  
  • 2012–2013  $0.23
JT167
New Member

Do we have to pay tax on trade-in value of car used for business?

Thank you!
michaelhennessey
Level 2

Do we have to pay tax on trade-in value of car used for business?

After 2018 all earlier answers are wrong!
message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
message box icon

Ready to start your taxes?

Hand off your taxes, get expert help, or do it yourself.

See Pricing
Manage cookies
v
ABCDEFGHIJKLMNOPQRSTUVWXYZabcdefghijklmnopqrstuvwxyz0123456789-_~