How can a majority business-use vehicle that I sold to CarMax for $8k and also had to pay an additional $2k cash to satisfy difference in payoff result in a gain?

Put into use in 2018. Drove 500 personal miles that year, which was the only period of personal use for that vehicle. Drove approx 73k miles after that brief personal use. Used standard deduction prior 4 tax years. Did not have a trade in at any point. Used actual deductions this year due to purchasing cargo van for work.

349

Expert Alumni

Feb 20, 2023 3:12:05 PM

When you use the mileage allowance to deduct your vehicle expenses, your depreciation is factored into the yearly allowance at the rate of about $0.26 per mile for the years in question here. So, your depreciation would be about $19,000 (73,000 miles x .26). You would deduct that from the purchase price of the vehicle times your business use percentage to arrive at the cost basis of the vehicle when you sold it. If that amount was less than the sales price, you would have a taxable gain to report on your tax return.

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How can a majority business-use vehicle that I sold to CarMax for $8k and also had to pay an additional $2k cash to satisfy difference in payoff result in a gain?