Changing cars mid year

[ryasun]

how should I record vehicle business expenses for the year if I owned a vehicle for self employed work that had lots of maintenance work done on it before selling it and then buying another vehicle for my work that I also put lots of maintenance into it?

[kdevere · Accepted solution]

If you have more than one vehicle that is used for business, you would add the additional vehicle.  For the vehicle that was sold, you would enter the mileage or actual expenses, whichever deduction you are using for that vehicle and you will indicate that you have stopped using it and the date.  The software will prompt you for the purchase and sale price as well.  The replacement vehicle would be added and the mileage or actual expenses reported for the replacement vehicle also. 

The software will walk you through the process of reporting the vehicle sale and calculating any gain on the vehicle along with applying the business use ratio to determine your deduction for the partial year use.  The same applies for the second vehicle, the software will apportion the expenses based on percentage of business use of the vehicle.  So each vehicle will receive their share of the deduction, based on time and business use percent.

[khood007]

Hi,

So I'm changing cars mid year and also considering changing tax method from mileage to actual expenses. The old car used the mileage and I answered the mileage for the year, both halves. Then the new car took down my expenses that was about a half year's worth. Then it said I should use the mileage because my write off would be larger. I'm not sure if it is comparing 1/2 year of expenses with a whole year of mileage? I know I have to choose one of those methods for the remaining life of the car.  Does Turbo tax know how to alter the mileage for an apples to apples comparison?

[ThomasM125]

The mileage allowance would simply be the business miles times the rate per mile, so you wouldn't be getting a "years worth of mileage."  Each car would be treated separately. The mileage allowance for each car would be the rate per mile times the business mileage you entered for the vehicle. The actual costs would be the depreciation on the vehicle for the portion of the year it was used in the business plus the cost of operation you entered. The suggestion by TurboTax regarding which method to use would be separate for each vehicle.

You need to keep in mind that you can switch from using the mileage allowance to using actual costs in the future, but you can't switch from actual cost in the first year to the mileage allowance later on. So, your decision on which method to use should take into consideration the future anticipated mileage.