Sold Old Business Vehicle

[tlee07]

Bought a truck for work in 2004 for $15,000 - have been using it 100% for business with standard mileage deduction the whole time. Sold it in 2019 for $1,500. When prompted to enter the past depreciation according to the table, the amount is greater than the purchase price so I entered the purchase price because it says not to go over. So...now the $15,000 is showing as income, the $1,500 as capital gain, and I have a pretty large tax liability. Is this correct? 

[Carl]

That is correct. If you've been using that vehicle for 100% business use since 2004 (that's 16 years) then there's no question that it has been fully depreciated, even with the standard mileage rate if you took the per-mile deduction each year. Therefore the cost basis of the vehicle is $0. So if you sell it for any price, the full amount you sell it for is taxable income in the tax year you sell it.

So what this amounts to, if you originally purchased the vehicle for say, $20,000, over the course of 16 years you have fully deducted that $20,000 from your taxable income. Now you sell it for $1,500 and you only pay taxes on that $1,500. Sure beats paying taxes on the entire depreciation recapture of $20,000.

[tlee07]

Thanks for the reply - but it seems I am being charged tax on the entire recapture. Do I change the cost basis to $0?

[Opus 17]

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@tlee07 wrote:

Thanks for the reply - but it seems I am being charged tax on the entire recapture. Do I change the cost basis to $0?

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I don't understand your question.  If you entered a basis of $15,000 and a sales price of $1500, you have a loss.  Your basis should be $0 and your sales price is $1500, which is $1500 of taxable depreciation recapture, but the tax on that should be no more than your marginal rate or 25% whichever is lower.

If you can manually enter your basis instead of calculating it, it would be zero at this point.