if I stopped to use one car for business and started to use a new car in the middle of 2025, how do I report it on 2025 tax?

[Vanessa A]

When you go into the vehicle expense section, you will enter each vehicle separately.  In the first few questions there is a screen that asks if any of these apply, one of the options will be I stopped using this car in 2025.  Check that box.  You will then be asked questions such as what you did with the vehicle and if you sold it or it was totaled, the selling price.  If it was totaled and you received insurance reimbursement, that would be the selling price.  It will ask if you took any depreciation, if you used the actual expense method, enter the actual amount of depreciation you took.  If you used the standard mileage method, then a portion of each years mileage consists of depreciation.  You will need to know what miles you claimed for each year of use.

The portion of the business standard mileage rate treated as depreciation is:

27 center per mile for 2020 

26 cents per mile for 2021 & 2022

28 cents per mile for 2023

 30 cents per mile for 2024

 33 cents per mile for 2025
 

Then when you go to enter the next vehicle, you will enter the date you started using the vehicle for business. 

Business Use of Vehicles

[mstonecliffe]

Thank you. I picked the option of stopping for business, and 100% use for personal. The system did not ask me about the depreciation. Is it ok?

[DianeW777]

Yes, assuming you did not sell or trade this car for another vehicle. Keep all the tax records for the vehicle you stopped using until you dispose of it. Until it is disposed of it will always be a tax asset. Likewise keep all the records for the current car you began using in your business until it is disposed of through sale, trade or junked.

If you did trade or sell it, please update here and we can provide details on how to report it on your tax return. A trade is a sale in tax law. Items you will need to know at a point of sale or trade for either or both cars.

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 the following:
   1. If you used only SMR: all of the business miles by year with the rate in the SMR for depreciation (see post by tax expert @Vanessa A)
   2. Total all of the actual depreciation expense used for the traded vehicle (see that information in the Vehicle screen

@mstonecliffe