How to tax trade-in value of mixed use vehicle

[thatsacut]

I used my car for personal and freelance work travel. It finally died on me, and I traded it in for $500 off a new 2022 vehicle. Only 17,379 miles of the 180,000 total miles were for work (9.655%).

I've been calculating deductions yearly using mileage, not expenses or asset deprecating. Do I need to pay taxes on the trade-in value, and  if so, how do I figure it out? Not sure how to enter this in TurboTax because it's not seeming to ask the right questions.

Also, can I deduct the $80 towing fee from when I had it towed to the mechanic, and the mechanic's fee to asses the situation as a sales expense? The dealer picked it up from the mechanic for free after the sale.

[MarilynG1 · Accepted solution]

If you've been claiming Standard Mileage as a Business Vehicle Deduction, a portion of that amount each year is Depreciation.  Since you know your total Business Miles, multiply that amount by the factor each year to determine the total amount of Depreciation Taken.  You could use an average of .25/mile, so in your case 17,379 x .25 = $4,344.75.  There is a table on page 24 in IRS Pub. 463 if you want to be exact.

So if you originally entered the Cost Basis of your vehicle when you first started using it for Business as 5K, for example, the remaining Cost Basis is $655.25 (after subtracting depreciation).  If you sold it for $500 (minus the tow/mechanics fee, which you can add as a Sales Expense) you actually had a loss on the trade-in.

In the Business Assets where you have your vehicle listed, Edit and indicate that you 'converted it to personal use' and a date.  Then report the sale/trade as Sale of Business Property.

Type 'sale of business property' in the Search area, then 'jump to sale of business property' or go to Wages & Income >Other Business Situations > Sale of Business Property >Start or Revisit > Enter your sale.  Check the first box, then enter Description, Sale Price, Cost, Depreciation.

You will get a screen that tell you you don't need to report this as it is a loss.

Click this link for more info on Sale of Business Vehicle.

@thatsacut