When you stop using a vehicle for business, a portion of the deduction for depreciation, can be recaptured as income. However, this only applies if you have a gain and usually you will have a loss when you stop using or sell a vehicle.
In TurboTax, you'll select sold or disposed of to report that you no longer use the vehicle for business. If you didn't sell it, then put "$0" for the sale price. You can return to the vehicle to Edit it or Delete it using the following steps:
If I have only ever taken standard mileage deduction, why is turbo tax asking me about depreciation when I have sold a car and started using a new car. Because I didn't know what TurboTax was trying to do it is now showing that I have a capital gain on the transaction which is incorrect. Not sure how to get it out. Any help would be greatly appreciated.
@jon7 Hi there - Did you ever figure out how to solve for your situation where you sold your car and it was telling you had gains from it. I'm in the same situation and not sure what to do.
TurboTax wants your vehicle information because if you sell a vehicle that you used in business you may have to recover some of the depreciation you previously claimed on it.
The standard mileage rate has a depreciation equivalent built in. That rate is .26 for 2019. So even if you only claimed standard mileage rate you may have to recapture some of that previously claimed depreciation.
Did you figure out how to solve TT reporting gains on sold vehicle?
When you claim the standard mileage rate when deducting your business car miles, you have to account for 'depreciation equivalent' when you dispose of the car.
Multiply the number of Business Miles you claimed each year by the amount shown for that year in the following table (page 24 in IRS Pub. 463) to determine your 'Prior Depreciation' amount to enter in TurboTax.
It is possible to have a Gain on the Sale/Disposition of a Business Vehicle, depending on how long it was used and % of Business Use.
Once you have determined the current cost basis of the vehicle (business portion of value when placed in service, less depreciation taken) and the Sales Price (if sold or traded in), TurboTax will calculate a Gain/Loss for you.
Click this link for more info on Disposition of a Business Vehicle.
I have accounted for depreciation equivalent and entered it in turbotax, but turbotax is not using it. Some how they're assuming vehicle has been fully depreciated.
Business portion cost basis: $40,475
Business portion proceeds: $19,951
Mileage Depreciation equiv: $ 2,486
Loss -$18,038
Turbotax showing Gain of $19,951
Thank you for your help.
If you have used your Business Vehicle for over five years, it is considered fully depreciated.
Click this link for more info on Depreciation of Business Assets.
If you have another vehicle you are now using for your Business, you could indicate for the old vehicle that you 'converted to 100% personal use' and enter the info on your new vehicle.
[Edited 1/28/2022 6:03 pm]
I am in the same situation. I purchased the vehicle for 17,100 in 2018 old it for $12,300 in 2021.
The depreciation deduction equivalent was approximately 2400 and the total mileage deduction claimed was only $4900 over those 3 years. Business and personal use was 50/50. TurboTax is claiming the whole $12,300 is a capital gain I owe tax on?
Go back through the sale of asset questions. You have entered something incorrectly into the system - the equation that you're explaining doesn't make any sense. Read each question carefully before answering.
I got a helpful answer from following post:
Solved: Re: 2021 Business Vehicle sold, TT showing gain bu... (intuit.com)
Last reply from AmeliesUncle worked for me.
Yep, tried carefully answering all questions several times. I did get a helpful answer at following post:
Solved: Re: 2021 Business Vehicle sold, TT showing gain bu... (intuit.com)
Last reply from AmeliesUncle worked for me.
Thank you.