Wife bought new car and I am using her old car. How to account for business use.

[mikaho]

My wife is self employed and has used her car for business in addition to personal use for several years. I am a w-2 employee and have also used my car for business as well as personal use. This year, we bought a new car for her, I started using her car and we sold my car.

I am not sure how to walk through the wizard in this situation. Will Turbo tax deal with the fact that her percentage use is technically only through 4/29/2020 and mine is only starts on 4/30/2020?

And as I walk through the wizard to record it as a business expense for her, the wizard asks me if "you started using it as a personal vehicle 100% of the time..." and if "your percentage of business use of the vehicle caried over the years."

Since I started using the car for business, we did not start using it for 100% personal, but the business use did vary over the years. But doesn't turbo tax know that since we have used turbo tax for each year's return?

Just want to make sure we are answering these questions and entering mileage correctly.

[mikaho]

Adding some additional info to this question. As I proceeded through the wizard, it is asking for sales price. We did not sell the car. And it gives me instructions to leave price blank if the car was converted to 100% personal use, but it was not. So if it was not sold and was not converted to 100% personal use, how do I complete the wizard?

[MissMCJ]

I believe that your wife's business will show that the car was converted to personal use.  Because a W2 employee can no longer claim vehicle expense.  I am sure someone else will let me know if that is not correct.

[Opus 17]

The wife’s car was converted 100% personal use. That’s what you need to report on your wife’s schedule C.  Then, if you were allowed to deduct your work use of a personal vehicle, you would add the car to your tax return using either the standard mileage rate or the exact expense method. However, W-2 employees are no longer allowed to deduct car expenses so you simply take it off your wife’s schedule C.

[mikaho]

Well that raises a whole new problem. If mileage is no longer a deduction for W2 employees, why is Turbo Tax not telling me that? I just got to that part of the wizard and it has not mentioned anything about this no longer being a valid deduction. In fact is it is walking through the whole mileage calculation wizard and showing me the deduction I am getting: "Nice! Based on what you've told us so far, your standard mileage deduction is $3,377."

[DaveF1006]

it depends. Employee expenses including mileage deductions are no longer deductible on federal income taxes but there are a handful states that allow W2 employee expenses. 

[Opus 17]

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@mikaho wrote:

Well that raises a whole new problem. If mileage is no longer a deduction for W2 employees, why is Turbo Tax not telling me that? I just got to that part of the wizard and it has not mentioned anything about this no longer being a valid deduction. In fact is it is walking through the whole mileage calculation wizard and showing me the deduction I am getting: "Nice! Based on what you've told us so far, your standard mileage deduction is $3,377."

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Some states allow the deduction.  Turbotax is designed so that most items are entered in the federal and then flow downhill to the state.  It was the easiest/laziest choice to leave the mileage deduction in the Federal section rather than remove it and add it separately to 30 or more state modules.