If I sold my vehicle to a dealership and then used the money to lease a vehicle and purchase a second, how do you report those figures?

[ryshermsinc]

We traded our Truck to a dealership, used the funds to pay off the loan, and used the remaining funds to pay for a new vehicle's lease, and then used the remainder of that to purchase a second vehicle; how do you report this?

[AmeliesUncle]

Are any of these vehicles used for business?  If not, nothing needs to be reported until you sold the vehicle at a gain.

[ryshermsinc]

Thank you, I have more information.

We owned both vehicles, both for business.

We sold the first one, and it was a wash, we simply had Carvana pick it up and they paid off the loan to within a few dollars.

We sold the second vehicle to a dealership who then paid off the little left on the loan ($2k) applied part of it ($5k) to a new lease, and then we received a check for $15k which was used to purchase a second vehicle privately. Purchase price originally was $29.5k but we put $5k into it for hauling.

[ryshermsinc]

Does that count as a loss?

To be clear; purchase price of vehicle #2 was $29.5k, we put $5k into it. 

We brought it to a dealership who agreed to pay the remaining $2k loan, apply $5k to our new lease, and then we received a check for $15k to purchase the 2nd vehicle from a private party a week later.

So we received $22k for it when we originally paid $29.5k. Is that a $7.5k loss, and/or do we have to pay tax on this?

[AmeliesUncle]

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@ryshermsinc wrote:

purchase price of vehicle #2 was $29.5k, we put $5k into it. 

So we received $22k for it when we originally paid $29.5k. 

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Was the $5,000 you put into it an "improvement" that was depreciated, or was it just "repairs" and maintenance?

Over the time that you owned the vehicle, what was the average business percentage?

How much depreciation were you able to take on the business vehicle?

[AmeliesUncle]

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@ryshermsinc wrote:

We owned both vehicles, both for business.

We sold the first one, and it was a wash, we simply had Carvana pick it up and they paid off the loan to within a few dollars.

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You sold TWO vehicles?  I guess I don't understand what that first vehicle is about because I don't think that was mentioned in your original post.  Was that in 2024?  

[ryshermsinc]

One thing, my mistake, we didn't owe $2k, we had the title. Please disregard that.

The $5k we put into it were to make it capable of hauling. It had a gooseneck trailer hitch installed in the bed, secondary shocks added to the axles, etc.

The average business use percentage was 82.15%.

I don't know how to answer your question of "how much depreciation was taken on the vehicle" - I believe we took the standard deduction and/or "straight line" or the most common filing method on TurboTax each year.

My main concern is knowing if I owe money or not, being that I paid more for it than I sold it for; the add-ons went with it as part of the trade-in ($29.5k purchase price, then when traded-in, they applied $5k to the new lease, and we got a check for $15k that was used to purchase another vehicle.

Wouldn't that be a $9.5k loss?

[ryshermsinc]

Yes. Two vehicles sold in 2024.

We sold vehicle 1n a LandRover to Carvana. They bought it for what was left on the loan.

We brought our second vehicle, a truck, purchased 6 years ago to a dealership and worked out a deal trading in the truck we owned, that we paid $29.5k for and added $5k of equipment to.

The dealership took the truck and basically gave us $20k for it.

Ignoring the equipment added, we paid $29.5k, and received $5k applied to a new VW Atlas lease (replacing the Land Rover purchased by Carvana), and received $15k via check. We then purchased a Prius with that. 

Do we owe money?

I'm sorry for the confusion and appreciate this more than you know.

[AmeliesUncle]

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@ryshermsinc wrote:

I don't know how to answer your question of "how much depreciation was taken on the vehicle" - I believe we took the standard deduction and/or "straight line" or the most common filing method on TurboTax each year.

Wouldn't that be a $9.5k loss?

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You need to find out the depreciation because that is part of the calculation of a gain or loss.  The amount of depreciation that you were able to take essentially lowers your 'cost', which has a large impact on if it was sold at a gain or loss.

If you used the Standard Mileage Rate, the link below (if the link doesn't bring you directly to it, find the subheading "Depreciation adjustment when you used the standard mileage rate") shows the amount of depreciation per mile (and it is 30 cents per mile for 2024).  But if you used Actual Expenses, you need to look at the "Depreciation and Amortization Worksheet" in TurboTax to see how much depreciation and/or Section 179 you took on the vehicle (both previous years plus current year).

https://www.irs.gov/publications/p463#en_US_2023_publink100034059

To further complicate things, because your vehicle was not 100% business use, TurboTax is NOT set up to report that and you need to do MANUALLY calculations to MANUALLY enter the gain or loss.

Because it is complicated, you might consider going to a tax professional this year.