Section 179 deduction on previous vehicle affect new purchase?

[94Bulldog]

I purchased a vehicle in 2018 and took the maximum allowable Section 179 deduction in 2018.  If I trade it in and purchase a new vehicle in 2020 does that affect the allowable 179 or bonus deduction on the new vehicle this year?  If so, how do I calculate how much?

[Critter-3]

It doesn't have anything to do with the new car.  It has everything to do with the old car since you will be reporting the sale on the return ... you can no longer trade in a vehicle on the tax return. 

[94Bulldog]

Maybe I am asking the question the wrong way.  I understand I will be able to take the full allowable 179/bonus deduction on the new car regardless.  How do I figure out the tax implication of selling the old one?  I took section 179 on the old one but two years have passed.  Not sure how that works as compared to having just taken each year's depreciation as it came.

Ultimately trying to figure out out if it makes sense to buy a new vehicle this year or if the section 179 from the old car wipes out most of the advantage for now. 

[Carl]

Here's the simplified facts.

*No* *matter* *what* *you* *do*, if you took the full SEC179 deduction on the old car in the year you purchased it or placed it in service, that means you deducted the entire cost of that car from your taxable income in the tax year you placed it in service. Therefore, your cost basis on that old car is "ZERO". That's because you have already deducted the full cost of the car in the tax year you purchased it, from your taxable income in that tax year. So if you sell that car for $1, that $1 is reportable and potentially taxable income.

So for a trade-in, that would make your trade-in value ZERO. If you donated it to a qualify charity, your qualified charitable donation amount is ZERO. If you junked it, it's junk value is ZERO. If you sold it for scrap, then whatever you sold it for is reportable/taxable income. If the car wasl stolen, it's value prior to the theft was zero, and after the theft was zero, and any insurance payout is reportable (and possibly taxable) income, regardless of what you did with that payout.

[Anonymous_]

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@94Bulldog wrote:

How do I figure out the tax implication of selling the old one?  

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If the Section 179 deduction took the basis on your old vehicle down to $0 (i.e., you wrote off the entire cost of the vehicle), then whatever the dealer allows as a trade-in value becomes your selling price.

[94Bulldog]

Thank you all for the replies! This was very helpful!!