Computing depreciation for a vehicle used for passive income

[lameri]

How does a car that was used for personal use get depreciated in the following situation?

- A car was bought in 2010, put in service 2017 when rental property X was put in service.

- Its business usage fluctuates between 5-15%.

I do see the car listed under the "depreciation and amortization report" in 2017 alongside with the rental property, but the depreciation basis is 0 (unlike that of the rental property), why? The car has some value... Assuming that's correct, I do not have any more questions, although I would definitely want to understand why.

If that is incorrect and some value should have been put there, I have the following question:

- Another property Y is bought and put in service in 2019. What value should be used to start depreciating the car for property Y?

[tagteam]

We probably need more details with respect to how you entered the asset (whether a value was entered) into the 2017 program.

[Carl]

Its business usage fluctuates between 5-15%.

That means you are taking the "per-mile" deduction for each mile of business use.

I do see the car listed under the "depreciation and amortization report" in 2017 alongside with the rental property, but the depreciation basis is 0

Precisely what it should show on that specific form, since you are using the per-mile deduction.

With the per-mile deduction, you are claiming 58.5 cents per mile for each business bile driven between 1/1/2022 and 6/30/2022. Then it's 62.5 cents per mile for each business mile driven between 7/1/2022 and 12/31/2022.

Of that per-mile amount, a portion of it is depreciation. So a portion of your depreciation is included for each mile driven. Therefore, it will always show ZERO on the 4562 when claiming a per-mile deduction.

[lameri]

@Carl Yes, I am. In that case, it does not need to show as depreciated and that's why it's not there with a cost basis?

[lameri]

@tagteam I'm not sure I understand. What kind of value? Like I said, I see the car listed in the Depreciation and Amortization Report, but the basis is 0.

[tagteam]

@lameri If you've always used the standard mileage rate, then there will be nothing to depreciate (i.e., there will be a zero in the depreciable basis column or it will be blank).

[lameri]

@tagteam I see, thanks. Well, then I don't understand why it is even listed in that report.

[tagteam]

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@lameri wrote:

@tagteam I see, thanks. Well, then I don't understand why it is even listed in that report.

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Because a certain amount of depreciation is embedded in the standard mileage rate.

See https://www.irs.gov/publications/p463#en_US_2022_publink100034056

Your basis is reduced by the amount of depreciation allowed. 

[lameri]

@tagteam I see this:

Rate of Depreciation Allowed in Standard Mileage Rate

  Year(s)Depreciation  

		Rate per Mile
	2021–2022	0.26
	2020	0.27
	2019	0.26
	2017–2018	0.25
	2015–2016	0.24
	2014	0.22
	2012–2013	0.23
	2011	0.22
	2010	0.23
	2008–2009	0.21
	2007	0.19
	2005–2006	0.17
	2003–2004	0.16
	2001–2002	0.15
	2000	0.14

So I guess the car had a zero from the get-go?

[tagteam]

Those are the depreciation figures for the standard mileage rate.

[Carl]

The amount of depreciation included in the per-mile deduction for years 2000-2022 can be seen in the chart at https://taxschool.illinois.edu/post/how-long-can-you-deduct-standard-mileage-on-the-same-vehicle/

[tagteam]

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@Carl wrote:

The amount of depreciation included in the per-mile deduction for years 2000-2022 can be seen in the chart at https://taxschool.illinois.edu/post/how-long-can-you-deduct-standard-mileage-on-the-same-vehicle/

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Here:

Rate of Depreciation Allowed in Standard Mileage Rate

	Year(s)	Depreciation
		Rate per Mile
	2021–2022	0.26
	2020	0.27
	2019	0.26
	2017–2018	0.25
	2015–2016	0.24
	2014	0.22
	2012–2013	0.23
	2011	0.22
	2010	0.23
	2008–2009	0.21
	2007	0.19
	2005–2006	0.17
	2003–2004	0.16
	2001–2002	0.15
	2000	0.14

Now it's been posted four times.

[lameri]

Thank you, everyone, for your response. I'm retaking this subject, now that I have some free time:

- OK, so I get it that with the standard deduction the depreciation shown in the "Depreciation and Amortization Report" is zero, since the depreciation is embedded in the deduction.

- Now, what happens when some years it is better to use the actual expenses? What cost basis is used? The "Car & Truck Expenses Worksheet" expects a value there (TurboTax throws a red exclamation mark otherwise). Should I look up the Blue Book value?

Other unrelated questions are:

- Since the actual expenses method prorates by usage (business vs total), does that mean that the expenses can be for personal use (like parking)?

By the way, were do parking and smog go in Schedule A?

Thank you!

[Carl]

Since the actual expenses method prorates by usage (business vs total), does that mean that the expenses can be for personal use (like parking)?

No. Personal use of a business vehicle does not produce any deductible expenses, and never has.

By the way, were do parking and smog go in Schedule A?

Nowhere, since personal use of a vehicle is not deductible. (Not to be confused with vehicle expenses incurred for bonafide medical needs and other such SCH A deductible expenses.)

[lameri]

@Carl So then why is the percentage of business use taken? I thought the philosophy of the actual expense method is to get the proration.