I used a vehicle for business and traded it in for another business vehicle in June. I'm having trouble figuring out the deductions for both vehicles.

You purchased your business vehicle as part of a trade-in then and need to handle the trade-in for the old business vehicle. Just to walk through the interview for this trade-in by following these steps:

For your old business vehicle:

1. Go to the Federal Taxes tab
2. Go to Wages and Income
3. Select I'll choose what I work on
4. Click Update on the line for Business Income and Expenses (Sch C)
5. Click Edit on the line for your business
6. Follow the prompts until you come to the page Business Expenses 
   
7. Click Start/Update on the line for Cars, trucks, and other vehicle expenses
8. Click Edit on the line for your old vehicle
9. Indicate that you own the vehicle
10. Follow the prompts until you come to the page Are You Still Using Your vehicle for Business and answer No then enter the date you sold it
11. Follow the prompts until you come to the page Did You Trade in Another Vehicle to Purchase this vehicle?This may be where you have entered that it was purchased as a trade-in. Answer accordingly
12. Follow through the prompts and you will be guided to a page titled Trade-In Link
13. Click on the Edit Trade-In button and make sure the vehicle in the list given is highlighted, then click Delete
14. You will be taken to a Delete Confirmation page and you will answer Yes. This will remove the Form 8824 which is tied to trading in a vehicle
    
15. Follow the prompts to indicate that this vehicle was sold, not traded in, and to enter in any relevant information regarding this sale.

I don't understand why you would do #15, as it WAS traded in, not SOLD.

This would be helpful if the same prompts came up.  As of step #10, there is no prompt asking if I am still using this vehicle for business.  Instead, I clicked the box "I stopped using this vehicle in 2018 and entered the appropriate date.

From this point, I get through all prompts and it asks get to a screen asking if any of these apply:

"You started using it as a personal vehicle 100% of the time at any point in 2018" [I left blank - does not apply]

"Your percentage of business use of the vehicle varied over the years"  [I left blank - does not apply]

"You gave it away as a gift in 2018"  [I left blank - does not apply]

"None of these" [I selected this option]

I then get to a screen asking for Sales price.  This is where I am stuck.  The trade-in value was $13,000, of which 7,493 was to pay-off the loan.  The remaining "credit" was applied against the purchase of the new vehicle.  No matter how I tweak the numbers, the checker has me running in circles, telling me I need to complete a Schedule C, then some other form of Installment payments, etc.  None of this applies.  I understand with new tax law, I am liable to pay income tax against the "credit" amount, but using TurboTax, I simply cannot get there.  HELP!!!!!!

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@MooseKaraoke wrote:

I then get to a screen asking for Sales price.  This is where I am stuck.  The trade-in value was $13,000....

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You simply enter $13,000 as your sales price. Effective Jan. 1, 2018, exchanges of personal property such as vehicles do not qualify for nonrecognition of gain or loss as like-kind exchanges.

See https://www.irs.gov/newsroom/like-kind-exchanges-now-limited-to-real-property

The transaction you entered into boils down to your having sold the car for $13,000 (which is your sales price) and the basis of the new vehicle is whatever you actually paid for it (i.e., trade-in value plus any additional cash you paid plus any debt you incurred).

I am having the same problem. Did you ever get a solution to this issue?

Then it starts asking about previous depreciation, etch.

I ma in the same boat - I traded in my vehicle which was financed. I did not receive any money. The "sales price" of my old vehicle (which was traded in) was the balance of the loan payoff. I did not receive ANY money. I then purchased the new vehicle.

It is asking: SALES PRICE: ___________

EXPENSE OF SALE: _____________   

I have no idea what it is asking me and I have read all the prompts and searched HELP; which didnt answer anything and then I googled help here. 

The sales price is the loan payoff and the expenses were expenses incurred during the trade, if any.

Expenses incurred during the trade include the price of the new (replacement) vehicle? Thank you! - Paul

PS: I cannot get to a point where it clearly asks about the cost of the new vehicle? - Paul

Not all the prompts match mine. I'm using Turbo Tax Deluxe. What do put in sale price and expenses for trade in?

The sales price will be the trade-in value/amount allowed towards the purchase of your new vehicle. The expense of sale could be zero since those expenses would likely be part of the expense to purchase of the new vehicle.  They would be added to the cost basis of the new vehicle; such as sales tax, title fees, etc.

The IRS law under the Tax Cuts and Jobs Act (TCJA) no longer allow a 'trade-in' to offset the cost of the new vehicle. It requires a sale of the old vehicle and then a new vehicle listed as a new asset for the total cost of the new vehicle.  Since the trade-in value is a taxable sale price, it also becomes part of the cost of the new vehicle.

Your tax basis (cost), for the vehicle you gave up, is the vehicle’s original cost, plus improvements, minus all your annual depreciation deductions. TurboTax will automatically calculate this if it has been an asset listed in your return.  You will indicate it was sold, then TurboTax will ask the necessary questions about the sale.

Dave, I am in the same boat as these other people. However, I was upside down on my trade. I owed $26,000 and the dealer gave me $20,000. So what is the sale price? The price of the new vehicle is that the unpaid cash balance due on delivery (found on the bill of sale from the dealership) minus title fees, etc. There is also listed credit insurance as a non includable cost of the vehicle, what is that? The new vehicle is a truck and I am going to use the section 179. 

Also, what is the amount that I put in Turbo tax for the traded in vehicle in the section Sales Price (for the old vehicle's expenses in the vehicle summary section) . It askes what is the business portion of the sales price. Again do I use the $20,000 and multiply by my usage to get the number or do I use the $26,000 loan amount. I just want to stay consistent with my numbers between the old vehicles and the purchase of the new vehicle.

Thanks for any guidance!

The vehicle sales price will be the $20,000 given to you as the trade value against the new truck.  If there are costs associated with the trade you will need to decipher what should be part of the new vehicle cost and what are actual selling expenses on the truck traded.  The dealership should be able to help you with those numbers.  

The credit insurance is likely something that makes payments in the event you are unable to make them.  Check with the dealership to know exactly what those fees represent.

Common expenses that are part of the new truck (add these to the cost of the truck-do NOT reduce it for the trade in value):

1. Sales Tax
2. Transfer fees for title and registration

The loan payoff is not part of the purchase or sale.  When you purchase a business vehicle you use the cost regardless of what is loan debt and when you sell the loan debt is not part of the equation.

I would suggest you select it was sold/disposed of and then enter the date.  Take down all of the prior depreciation for the truck you traded. Indicate that it was not sold, simply removed from service.

1. Add the percentage of business use for each year together for the life of the asset (from first year and every year you used it for business before trading it) . 
2. Take the total business miles divided by the total miles (all years) for the actual business use percentage.
3. Multiply that percentage by the original full cost of the vehicle (amount used for depreciation the year you purchased this truck). This is the business portion of the original cost basis for the vehicle. 
4. Write down the total depreciation expense for all years. including the current year for the portion of the year before the trade and then add them together. This is the total depreciation used on the vehicle. 
5. Now you are ready to enter the sale of the vehicle under Sale of Business Property (not the business activities).

To record the sale of a business asset (vehicle) outside of the business/asset entry.

1. Sign into your TurboTax account:
   1. Select that you disposed of the asset and answer the questions as though it was disposed of.
   2. Under Wages & Income >Other Business Situations > Sale of Business Property >Start or Revisit > Enter your sale
   3. Select 'Property other than real estate....' 
   4. See the images below for assistance.

Please update the issue if you need further clarification.

@dantheman98

I am using Home and Business software. Some of what you have outlined I can't find where to input. I believe you have described the purchase of the new vehicle so I understand. However, the accounting for the old vehicle I am still not figuring out. Your help has been and will be invaluable.

Here are an outline of steps that I posted earlier for one of our posters. Some of the details may be different but you may get some idea on the sequence of steps.

1. Go to federal>income and expenses>
2. Self-Employment>Self-employment income and expenses
3. Complete the profile that asks about your business
4. Then there will be a screen where you will enter your self-employment income.
5. After entering, you will start entering expenses into your program (you may have reached this point but I have to mention)
6. Move down to vehicle expenses.
7. As you start to enter your vehicle expenses, be sure to check the box indicating you stopped using the vehicle in 2021. Then a pop up will appear that asks you to enter the date you sold the car.
8. Now scroll through and answer the questions correctly, including mileage etc. Continue through until you are informed what your mileage deduction will be.
9. Continue until it asks for the sales price of the card. This is generally the trade in value you received for the car. Use the business portion percentage to enter this
10. Next you will enter the business portion cost basis of the vehicle. This is the cost of the vehicle when you first bought it.
11. If you bought the vehicle on a trade in, you will fill out the information in the Let's get the info on your gain or loss basis screen.
12. Now there will be a screen where you need to calculate Depreciation Equivalent. If you have taken the mileage deduction in previous years, you need to enter the prior Depreciation Equivalent.  To determine this value, you will need to get all the mileage records from previous years and multiply the equivalent listed in the learn more link that is listed on the page. If you claimed mileage in previous years, part of the mileage deduction had a depreciation component attached to the mileage deduction. Now since you sold your vehicle, a depreciation recapture must take place to recapture that previously claimed depreciation.
13. Let me know if this helps.

[ Edited 03/22/22| 03:13 PMPST]

@dantheman98 

Dave, two questions from your last post. Frist on step 9, the system says to use the business portion but you mentioned it is the sale price. Just making sure that I am putting the right number down. On step 12, the system says that turbo tax will compute the depreciation equivalent. Does the system add that number into what I enter, so I only need to enter 2019 and 2020 calculations?

Thank you for your help!!!

Yes, calculate the business portion of the basis and the sales price so that you will not experience a full gain or loss. Multiply each by the business percentage that you used the vehicle. 

For the depreciation equivalent, you will need to calculate this. To do this, click on the learn more link that is listed on  the page to calculate the depreciation equivalent. 

• For all of the years that you claimed mileage in the past, you need to multiply each year's mileage by the percentage that is shown in the learn more link. So if you claimed 10,000 miles in year 2019, you would multiply that by .26.
• For 2020, the mileage will be multiplied by .27.
• add those two amounts and that is the total that will be recorded in the prior depreciation boxes.
• I used year's 2019 and 2020 but this will be reported for all prior years that you reported mileage. 

@dantheman98

That answer just confused me more

This has been a long thread with a number of questions. What is specifically your question?

@Darickbrown

I guess I'm somewhat frustrated.  I apologize, I've used TT as long as I can remember because it makes doing my taxes easy.  I have never had as complicated calculation/TT questions poorly explained as this. 

Here goes.

I traded my vehicle that I used approximately 75% of the time for business on December 29, 2021.  It was a trade in of a trade in of a trade in, etc.  Do I use what I think it was worth when I put it to use in 2019 or do I use the difference of a trade in.  

I'm totally confused on the next pages calculation.

Basis for gain/loss and Basis for AMT gain/loss

Then the next page, just as lost.

You used to go through the trade in of like kind property in the past. The IRS changed the rules in 2018 and now you have to just sell the car you traded in and enter the new vehicle as an asset.

Your traded in vehicle was purchased 2019, after the new laws, so the basis should be simply what you paid for it. You would only have a different AMT value if you had a form 6251 from a prior year regarding this vehicle.

@Darickbrown

Hello-2022 vehicle transaction:

-trade in allowance=$16,000

-loan payoff on trade in vehicle=$13,470

From your posts, it appears that sales price (for the depreciation etc calculation section) is the $16,000.   Do I ever get to expense the $13,470 anywhere?  As part of the new vehicle purchase price maybe?  I initially just used the net gain, which is apparently incorrect.  Makes a big difference!  Thanks very much.

On a farm return how do I enter a new tractor when I traded in an old tractor that was fully depreciated?

Thanks