If you enter the vehicle information in the expense portion in your return, there is a check mark that indicates you stopped using it for business, then there is a box that you would list the date you stop using it for business.
- Now you will navigate through the screens answering questions and eventually there will be a place where you would put sale price. then you would enter a sale cost which is generally the Fair Market Value of the car when you sold it.
- Leave the the screen value blank when it asks for gain or loss basis.
- Next it asks for you to calculate depreciation equivalent. Here you would put in $2730. There won't be any additional questions regarding mileage.
- Since you have taken mileage in the past, it has depreciation built into the amount. since you claimed depreciation in the past, the equivalent must be added back to the sales price of the car. This is called depreciation recapture.
- Continue until done.
There could be a gain. Here is how this works. The cash you got for the car is $16,300. Adding the depreciation equivalent will result in a sum of $19,030. Now you will subtract $15,700. Your taxable gain based on this is $3330. This amount may vary depending on if you claimed any mileage in 2023.
Hopefully, this will give you an idea how a taxable gain is determined for a sale of a business vehicle.
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