Sale of personal vehicle I used for business

[Melbres]

Please help.  Turbo tax does not make this simple. I don't know if I'm figuring this right,  an accountant tried to explain but i still don't think i understand. And other posts like this are not helping either.  Started business in Sept 22 wrote off 412 miles on 22 taxes and 4126 miles in 23. It was a personal vehicle used for business, small llc. It was worth about $39,000 (8 months old when started using for business, I think fair market value,  $42.5K new). I used it 33% for business. Sold on 12/18/23. Used standard mileage rate so when calculating for TT, accumulated depreciation I took was $1262 ( 412 x .26 (year 22)plus 4126 x .28 (year 23) from miles above??? Sold vehicle for $32,500, 33% business use so $10725 is business portion sale price??? No expense for sale as I traded in.  

I come up with a business loss of $882.

The questions I need to fill

*Sale price (business portion only) $10,725

*Expense of sale $0 traded for edge.

*Vehicle total cost when put in service $39,000 ??- doesn't say just business portion 

*Bass for gain/loss (enter 100% of basis) $37737?? Vehicle total cost minus accumulated depreciation  39,000-1262 =37,737

*Basis for AMT gain/loss (enter 100% of basis) ??

*Depreciation Equivalent $1262 ?? Not sure I'm understanding this correctly. 

*AMT Depreciation Equivalent ??

Turbo tax does a terrible job explaining. I have been searching this for 2 days.  Any insight is appreciated. 

[Melbres]

[Mike9241]

1/3 business use of 39000 FMV when put to business use = business tax basis = 13000 less depreciation 1262 = 11738

proceeds 32500 * 1/3 = 10833

10833 - 11738 -905 loss 

10725 is 1/3 of 32175

when a personal asset is put to business use the tax basis for business is the lower of cost or Fair Market Value. in your case, FMV is lower so that is used for business deprecition, gain or loss

for your personal portion 

you cost less 13000 = tax basis of personal portion

sales price 2/3 of 32500 = 21667 - tax basis of personal portion, if loss it's a non-deductible personal loss. if a gain it's taxable

not sure how you came up with 1/3 business use. 

business use once converted would be business miles divided by total mileage.

hope you kept records of nusiness mileage . 

[Melbres]

This makes sense. I got 33% business use from turbo tax.  It said right on the screen to determine your business use percentage take 32.73% x the sale price. I rounded the percentage for the question. 

I used qb mileage app. So it keep track of personal and business. 

And your right about the numbers. What I did was times the 32500 by. 33 for 33%. That's how I got the 10725. 

I borrowed a cheat sheet from a YouTube video that I though would help me.  Mine is the red.  But it was a video for someone who took full depreciation. I might have confused myself more by it. 

[DianeW777 · Accepted solution]

The following information should be helpful if you follow it through.  

The correct action is that you have taken this vehicle out of service (sold, disposed of, etc). For tax purposes, when it was sold you have created a taxable event.  The information below will show what to select so that the vehicle will not come up again and this starts at the federal return. There is a difference in calculating the sale based on whether you used only the standard mileage rate or actual expenses or both. 

The way to report the sale or trade-in, (trade is not recognized by the IRS any longer for equipment or vehicles) is as follows. You have all the records so it should provide you the detail to move forward.

1. All business miles for all years and then total miles for all years - divide business miles by total miles to arrive at your overall business use percentage for the life of the vehicle. You will use this percentage times the selling price (trade-in value) to arrive at the business selling price. 
2. Calculate the standard mileage rate depreciation portion for the business miles each year if that is the method you used for the expenses each year.  If not use the depreciation you actually deducted each year your vehicle was used for your business. You already calculated this correctly (accumulated depreciation I took was $1262 ( 412 x .26 (year 22)plus 4126 x .28 (year 23) from miles above).
   •  A portion of the standard mileage rate is considered depreciation.
3. When go to the vehicle information under your business you can select 'Sold, disposed of, etc....' then do not indicate it was sold.  You must say 'Yes' it was converted to personal use.  This will eliminate any sales information in the vehicle itself.
4. Once you have completed the information in that section you will follow the steps below to enter your sale:
   1. Go to Other Business Situations
   2. Scroll to Sale of  Business Property
   3. On the next screen select Sales of business or rental property that you haven't already reported
   4. Use the information from step one and the depreciation from step 2 to complete your sale
5. If the personal portion of your vehicle is a loss there is nothing to report for that portion of the sale/trade.  

Once this is completed your sale will be recorded properly on your return. The image below is the correct selection for this sale.

@Melbres 

[Melbres]

Yes!!! This made so much sense.  I am now complete with this.  Turbo tax could do better with this.  Thank you so much!

[no-name1]

DianeW777 - I have very similar situation. This was  helpful.  Following your instructions,  my business Sale price is $1,728.88 and the Depreciation taken on the Property is 1,779.55.  But I don't know what to enter in the Cost of Property blank? How is that calculated?

I have all the busines/personal miles, total miles, etc.  My % business miles varied each year.  The total business percentage, for example is .099

Thank you so much - this is the last thing to finish and I'm done!!

[DianeW777]

You have a good handle on the process. The cost of your vehicle is the original cost multiplied by the business use percentage you have calculated.  

@no-name1 

[no-name1]

Thank you SO much for your replies Diane!!!  I'm sure this is a crazy weekend for you!

I'm still not 100% sure the sale of business vehicle is correct.  Have tried it two ways with different results and I don't know which one is correct,  I just want to report the sale.

To recap;

.099 business portion over the years used in business. (the business % varied every year from 2017-2023) so I calculated it manually (business miles/total miles).

Took standard mileage deduction each year

$46,607 FMV at the time I started the business in 2017 and began using it for business.   (it was a personal car I bought in 2016 before I started the business)

$1,780 - calculation of the total depreciation portions of standard mileage 2017-2023

$17,500 - total sale price  

$1,730  business portion of sale price (17,500 .099)

1.  When I enter sale info in Business Income Expenses (Such C), TT calculates a result of $1,730 taxable income.  (I gave up on the conversion to personal use.  I sold it at about the same time so it makes no difference,  I just want to report the sale.)

2. I erased all of that and then tried it under Sale of Business Property, Any Other Property Sales, Sale of Property Not already Reported.  I entered all my figures, and TT tells me it does not need to be reported and deleted the information.

Which one is correct to use?  Obviously it's a loss when basis is 46k and sale is 17K, not a gain.  The only thing I can think is regardless of whether it's a gain or loss, IRS wants depreciation recaptured?  But that doesn't make sense either because the figure TT calculated in Sch C is the same amount as the business % of the sale price!

[RobertB4444]

With that kind of a loss I think not reporting it is fine.  Go with the system recommendation.

@no-name1 

[2naturesouls]

I am using a Home and Business 2024 version of Software that I purchased thru Costco.  I have a vehicle that was used primarily for personal but 1% for business and now it has sold.  When I looked thru your expert tax advice forums I was told NOT to check the  "vehicle was sold, disposed of, etc" but to instead use the "Other business situations" then the "Sales of business property" tabs. I am not finding those tabs anywhere in this version of software.  Please help 

[Melbres]

That is how I did it, comment above was really helpful. I used "other business situations" "sale of business property". I think you are on the right path. I used online version of turbo tax, and I don't have the software to see where that is with what you bought. Is there a search bar with that version? I tried to Google it with the software version but it wasn't very helpful.  I'm sorry I'm not more help.

[DianeW777]

This sale can be completed in TurboTax Desktop as well using the information below. Keep in mind in the vehicle entry that you indicate it was converted to personal use and NOT that it was sold.  Because of the potential changes in business use percentages, it becomes a complicated process.  For this reason it's best to use the information below to actually report the business portion of the sale.

If there is any gain on the personal portion of the vehicle that would be reported separately under 'Investment Sales'.

•  Where do I enter Investment Sales?

1. Business Tab > Business Income and Expenses > Scroll to Less Common Business Situations
2. Scroll to Sale of  Business Property
3. On the next screen select Sales of business or rental property that you haven't already reported
4. Use the information from step one and the depreciation from step 2 to complete your sale
5. If the personal portion of your vehicle is a loss there is nothing to report for that portion of the sale/trade.

@2naturesouls 

@Melbres 

[JTParsonsW4JTP]

I'm having a similar issue with a 2001 vehicle I took out of service last year. I put just over 300K miles on it over 20 years, of which 23% was for business. I followed your advice to the initial question--noting in the Schedule C section that it was converted to personal use. I received $500 for it on a trade in.

In doing the Sale of Business Property section, the recaptured depreciation over that period ($15,000+) exceeds the fair market value when I bought it ($10,000), and the TT check says prior depreciation can't exceed the cost. 

So, I"m very confused. 

[bill1824]

I have spent the past week trying to enter the sale of my personal/business vehicle.  No matter how I tried to enter it on the "car & truck worksheet" the data would change and I would get error codes on most entries.

I used the method suggested by posters on this site and entered the reqd data.  The software told me that I didn't have any gain and as such the info would be removed from my return.

However, I went into "forms" and found that it had generated a Form 4797 Part III with all the data I had entered.

It carried the loss on line 24 to 25b and on to Sch 1, line 4.

The form also required that a type of property be selected (1245).  As soon as you do that, line 21 on the 4797 shows an error code.

I've read the suggest method in above posts but I wonder if the " successful" preparers have looked for what forms may have been generated.

I'm using the downloaded desktop Premier version, since they no longer offer the disc. 

And am now wonder about the quality of my download since others are being successful.

I would love to get this return filed, any suggestions (positive)