Sold Veheicle/Purchased another

[JoeMal]

Sold my 2005. its was just worn out. Used in business since new. Serious issues arose, sole it for just  2k as it needed major work and had almost 200k miles on it. . Purchased a 2002 Toyota for business use in excellent condition. How does depreciation work  going forward?

[DianeW777]

If you have your old vehicle listed in your self employment activity you will report the sale of that vehicle.  If you used standard mileage rate all years there is a depreciation component that you must use to calculate the depreciation (see the chart below).  If you used actual expenses, then the depreciation would have been exhausted by now so the business use percentage of the vehicle would be the depreciation you used on your tax returns.

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.
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 2002 Toyota purchased in 2023 - my advice would be to use the standard mileage rate which will provide a greater benefit in the long term and you must make this choice the first year you place a vehicle in service.  Enter this vehicle by adding another and follow the screen prompts.