Schedule C Filer - Standard Mileage Deduction - Vehicle was totaled in 2021

[jhgkty3928]

Hello, 

I drive for Doordash as a side hustle and the vehicle I used when I started the side gig in 2020 was wrecked and declared a total loss in early 2021. I deducted miles using the SMR in 2020, and the vehicle was owned by me but not used for business of any kind prior to that year. 

I understand that I need to mark the vehicle as disposed of in TurboTax and enter information for my new vehicle for this year (in order to deduct mileage on that vehicle for 2021). 

I also know that I (may) need to report a portion of the insurance check I received as payment for the total loss on my taxes this year. 

My question is this - when computing the "Sales Price" (see screenshot), am I expected calculate the business use percentage by using the total miles and business miles driven only in 2021 (when the vehicle was disposed of), in 2020 and 2021 (the entire time between when the vehicle was put into service and when it was totaled), over the entire time I owned the vehicle, or something else? Each of those combinations would have different effects on the "Sales Price" that is attributable to business. For example, including miles since the beginning of time (~100K total) and dividing by business miles since the beginning of time (5790) would generate a business use percentage of 5.8%.

Doing this calculation using 2021 business miles would mean NONE of the sale is attributable to business, as I am not claiming any business miles for this year. That doesn't seem right to me, knowing the IRS. 

I assume I am supposed to be computing this only for years in which I took a mileage deduction on the vehicle (e.g. 2020/2021 only in my case). I'm not supposed to include personal miles driven before 2020 in the overall calculation?

I've reviewed the IRS guidance and can't seem to find a firm solution, and TurboTax also isn't helpful. 

Thanks!

[KrisD15]

When computing the business use percentage, it is ALL the miles you put on the vehicle. All the personal, all the business. 

For example, say you bought the vehicle 4 years ago and it had 100,000 miles on it when it is totaled. You drove it for 50,000 miles before using it for your business. THEN, when you started using it for deliveries, and you drove 25,000 business and 25,000 personal over the next 2 years. 

That means out of 100,000 miles, 75,000 miles were personal and 25,000 were business. When you sell the car, or get the settlement, 3/4 or 75% is personal and 1/4 or 25% is business. The gain or loss would be allocated that way. 

In your example, it comes out to 5.8% if you put all 100,000 miles on that vehicle. If it had 25,000 on it when you bought it, the percentage would be 7.7% (5790 divided by 75,000).

NEXT, and this is rather important, even when you use the Standard Mileage Deduction, there is DEPRECIATION built into that rate for that year. When you stop using the vehicle for business, that amount of depreciation (depreciation recapture) needs to be reported. It is taxed at your income tax rate.  

FINALLY, it does not matter to the IRS whether you report the mileage deduction or not. You still need to report the "depreciation recapture" for the "deduction you took or could have taken".  So the miles you used the vehicle in 2021 would also count. 

IRS PUB 544

[jhgkty3928]

Thank you for the information.