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How do I enter the sale of a vehicle used for a business or rental property?

by TurboTax• Updated 6 days ago

There are two options for claiming a deduction for the business use of your car. The Standard Mileage Rate (SMR) deduction is based solely on the number of miles you drove for business purposes. The Actual Expenses option may provide a larger deduction, if you keep good records and want to claim a larger depreciation deduction the first year. You can learn more about them in this help article.

Note that if you choose actual expenses the first year you use the vehicle for business, you must always use that method for that vehicle.

This choice also comes into play when you sell your business vehicle. You’ll need to do some math if you used the standard mileage rate. If you claimed actual expenses each year, you’ll only need the information from your last tax return to report the sale.

Select the option that describes how you used your vehicle. Then follow the steps.

My vehicle was used exclusively for my business or rental activities

Go to the business or rental property where you used the vehicle. (If you used the vehicle for more than one activity, start with the business/rental with the most number of business miles.)

  • For a Schedule C business, search for schedule c and select the Jump to link.
  • For a rental property, search for rentals and select the Jump to link.
  • You can also select Tax Tools in the left column. Next select Tools, then Topic Search. Enter your topic, select the topic in the list, and then go directly to the start of that section. 
  1. Add or edit your business/rental property.
  2. Continue through the questions to the Business/Rental Expenses list.
  3. Under Expenses, select Vehicle, Business Vehicle Expense, or Cars, trucks, and other vehicle expenses, depending on your version of TurboTax. Or select Add an Expense and then select Vehicle.
  4. Edit/Update the vehicle expense topic.
  5. Add a vehicle (or edit an existing vehicle).
  6. On the Let’s get some info about this vehicle screen select the box for I stopped using this vehicle in 20XX. Then enter the date you stopped using the vehicle in the box that appears.
  7. Continue and enter total miles and business miles for the current year. TurboTax will use your entries to determine the business use percentage for the vehicle.
    • If you used this vehicle for more than one business/rental, enter the same number of total miles, but only the miles driven for this business for “business miles.”
  8. Depending on how you reported this vehicle in the past, accept the SMR or enter your actual expenses.
  9. Enter any additional expenses such as parking, tolls, etc.
  10. Answer the question, “Do any of these apply to [your vehicle]?”
  11. Answer Yes to the question, “Did you convert this asset to nonbusiness use?”
  12. If you are directed to enter this sale in another section of TurboTax, skip to the end of the questions.
  13. On the Sales Price page, enter the business portion of the amount you were paid for the vehicle and any sales expenses you paid. Adjust the total amount for the business use percentage.
    Example: Total Proceeds $20,000 x Business use percentage 55% = Business Portion $11,000.
    (TurboTax doesn’t make this adjustment for you.)
  14. Unless you traded in the vehicle, you can skip “Let’s get the info on your gain or loss basis.” If you’re not sure, read the Learn more links on this page.
  15. Answer the question, “Installment sale?” (This isn't common).
  16. TurboTax calculates the Gain or Loss on the sale of your vehicle.

    Gain or Loss is calculated as:
    Business portion of the sales price (proceeds x business use percentage).

    Less: Business portion of the original cost of the vehicle (Cost  x business use percentage).

    Less: Accumulated Depreciation, prior year plus current year (what you actually deducted on your returns).

    Equals: Gain or Loss on Sale.

A note on depreciation recapture:

If you sell a vehicle before the end of its useful life (5 years for most vehicles), or took a Section 179 deduction the first year you used the vehicle, the sale may include additional gain for the depreciation expense you have claimed for this vehicle.

Two exceptions:

  1. If you always used the Standard Mileage Rate (SMR), there is no recapture or
  2. If the sale results in a loss, there is no recapture.

The remaining gain after deducting depreciation recapture is taxed at your capital gain rate. This amount is typically a long-term gain on Schedule D (if you held the vehicle for at least a year).

If you’re using TurboTax Desktop, you can review your entries using Forms Mode. Look for “Car & Truck Wks [your vehicle]” in the left column. The sale information appears in Part VII of that form.

Go to the business or rental property where you used the vehicle. (If you used the vehicle for more than one activity, start with the business/rental with the most number of business miles.)

  • For a Schedule C business, search for schedule c and select the Jump to link.
  • For a rental property, search for rentals and select the Jump to link.
  • You can also select Show Topic List on the top right and select the section or sub-section you are looking for. 
  1. Add or edit your business/rental property.
  2. Continue through the questions to the Business/Rental Expenses list.
  3. Under Expenses, select Vehicle, Business Vehicle Expense, or Cars, trucks, and other vehicle expenses, depending on your version of TurboTax. Or select Add an Expense and then select Vehicle.
  4. Edit/Update the vehicle expense topic.
  5. Add a vehicle (or edit an existing vehicle).
  6. On the Let’s get some info about this vehicle screen select the box for I stopped using this vehicle in 20XX. Then enter the date you stopped using the vehicle in the box that appears.
  7. Continue and enter total miles and business miles for the current year. TurboTax will use your entries to determine the business use percentage for the vehicle.
    • If you used this vehicle for more than one business/rental, enter the same number of total miles, but only the miles driven for this business for “business miles.”
  8. Depending on how you reported this vehicle in the past, accept the SMR or enter your actual expenses.
  9. Enter any additional expenses such as parking, tolls, etc.
  10. Answer the question, “Do any of these apply to [your vehicle]?”
  11. Answer Yes to the question, “Did you convert this asset to nonbusiness use?”
  12. If you are directed to enter this sale in another section of TurboTax, skip to the end of the questions.
  13. On the Sales Price page, enter the business portion of the amount you were paid for the vehicle and any sales expenses you paid. Adjust the total amount for the business use percentage.
    Example: Total Proceeds $20,000 x Business use percentage 55% = Business Portion $11,000.
    (TurboTax doesn’t make this adjustment for you.)
  14. Unless you traded in the vehicle, you can skip “Let’s get the info on your gain or loss basis.” If you’re not sure, read the Learn more links on this page.
  15. Answer the question, “Installment sale?” (This isn't common).
  16. TurboTax calculates the Gain or Loss on the sale of your vehicle.

    Gain or Loss is calculated as:
    Business portion of the sales price (proceeds x business use percentage).

    Less: Business portion of the original cost of the vehicle (Cost  x business use percentage).

    Less: Accumulated Depreciation, prior year plus current year (what you actually deducted on your returns).

    Equals: Gain or Loss on Sale.

A note on depreciation recapture:

If you sell a vehicle before the end of its useful life (5 years for most vehicles), or took a Section 179 deduction the first year you used the vehicle, the sale may include additional gain for the depreciation expense you have claimed for this vehicle.

Two exceptions:

  1. If you always used the Standard Mileage Rate (SMR), there is no recapture or
  2. If the sale results in a loss, there is no recapture.

The remaining gain after deducting depreciation recapture is taxed at your capital gain rate. This amount is typically a long-term gain on Schedule D (if you held the vehicle for at least a year).

If you’re using TurboTax Desktop, you can review your entries using Forms Mode. Look for “Car & Truck Wks [your vehicle]” in the left column. The sale information appears in Part VII of that form.

My business use percentage varied from year to year

Go to the business or rental property where you used the vehicle. (If you used the vehicle for more than one activity, start with the business/rental with the most number of business miles.)

  • For a Schedule C business, search for schedule c and select the Jump to link.
  • For a rental property, search for rentals and select the Jump to link.
  • You can also select Tax Tools in the left column. Next select Tools, then Topic Search. Enter your topic, select the topic in the list, and then go directly to the start of that section. 
  1. Add or edit your business/rental property.
  2. Continue through the questions to the Business/Rental Expenses list.
  3. Under Expenses, select Vehicle, Business Vehicle Expense, or Cars, trucks, and other vehicle expenses, depending on your version of TurboTax.
  4. Edit/Update the vehicle expense topic.
  5. Add a vehicle (or edit an existing vehicle).
  6. On the Here’s what we have from last year… screen or Let’s get some info about this vehicle screen select the box for I stopped using this vehicle in 20XX. Then enter the date you stopped using the vehicle in the box that appears.
  7. Continue and enter total miles and business miles for the current year. TurboTax will use your entries to determine the business use percentage for the vehicle.
    • If you used this vehicle for more than one business/rental, enter the same number of total miles, but only the miles driven for this business for “business miles.”
  8. Depending on how you reported this vehicle in the past, accept the SMR or enter your actual expenses.
  9. Enter any additional expenses such as parking, tolls, etc.
  10. On the Do any of these apply to [your vehicle]? screen select the box for Your percentage of business use of the vehicle varied over the years.
  11. Answer Yes to the question “Did you convert this asset to personal (nonbusiness) use?”
  12. You should be directed to enter this sale in another section of TurboTax, so skip to the end of the questions.
  13. Continue through to the Income Summary page and go to Other Business Situations (Business Items in TurboTax Desktop).
  14. Scroll down to Sale of Business Property.
  15. On the next screen, select Sales of business or rental property that you haven’t already reported.
  16. If you claimed a Section 179 deduction the first year you used the vehicle, also select the box for A recapture of a previously taken section 179 or listed property deduction.
  17. Complete the Listed Property page if actual expenses were claimed for the vehicle.
  18. Now, do some math:
    • The overall business use percentage for the life of the vehicle is calculated as the total business miles for all years you reported the vehicle divided by the total miles you drove the vehicle for all purposes.
    • The business portion of the selling price is the total selling price multiplied by the overall business use percentage you just calculated.
    • If you took the standard mileage rate (SMR) each year, you need to calculate the portion of that deduction that was depreciation because a part of the SMR is considered to be depreciation. For each year, multiply the business miles x the conversion rate:
      • Tax Year: Rate per mile
      • 2024: 0.30
      • 2023: 0.28
      • 2021-2022: 0.26
      • 2020: 0.29
    • If you used actual expenses, use the accumulated depreciation from the Depreciation and Amortization Report included with your TurboTax return. Sum the prior and current depreciation for your vehicle from that table.
  19. Continue the entry for the Sale of Business Property. 
  20. Add a sale and enter a description of the vehicle, the related dates, and the sales information:
    • Total Sales Price = business portion of selling price
    • Cost of property = original purchase price x business use percentage
    • Deprecation taken on this property = accumulated depreciation calculated earlier, less any recapture for Listed Property or Section 179.
  21. For What type of property is this? select the box for Property other than real estate that I took depreciation on.
  22. Skip the question about Form 1099-B.
  23. If your business use was less than 50% for any year that you used the vehicle for business, answer Yes for this question.
  24. Listed Property / Section 179 Recapture:
    • If you took Section 179 the first year you used the vehicle and the business use fell below 50% this year, you may be taxed on “depreciation recapture.” See the blue “how to compute” link for help on what to enter for these boxes.
    • If TurboTax determines that you need to report this recapture, see the blue “where to report” link for instructions on including this as other business/rental income.
    • If your vehicle is fully depreciated (original cost less accumulated depreciation = zero), enter the same amount for the Section 179 depreciation questions.
  25. If you have Listed Property Recapture or Section 179 Recapture, go back to the business or rental topic and include this amount as Other or additional income.

Gain or Loss is calculated as:

Business portion of the sales price (proceeds x business use percentage).

Less: Business portion of the original cost of the vehicle (Cost x business use percentage).

Less: Accumulated Depreciation, prior year plus current year.

Equals: Gain or Loss on Sale.

The remaining gain after deducting depreciation recapture is taxed at your capital gain rate. This amount is typically a long-term gain on Schedule D (if you held the vehicle for at least a year).

If using the personal use percentage shows that you have a gain, it is taxable. If you have a loss there is nothing to report. Example: if your business use is 60% and the personal use is 40%, calculate 40% of both the sales price and cost basis then subtract the cost basis from the sale price to see if there is gain (taxable) or loss (not reported).

If you’re using TurboTax Desktop, you can review your entries using Forms Mode. Look for Form 4797 and Enterable Form 4797 in the left column.

Go to the business or rental property where you used the vehicle. (If you used the vehicle for more than one activity, start with the business/rental with the most number of business miles.)

  • For a Schedule C business, search for schedule c and select the Jump to link.
  • For a rental property, search for rentals and select the Jump to link.
  • You can also select Show Topic List on the top right and select the section or sub-section you are looking for. 
  1. Add or edit your business/rental property.
  2. Continue through the questions to the Business/Rental Expenses list.
  3. Under Expenses, select Vehicle, Business Vehicle Expense, or Cars, trucks, and other vehicle expenses, depending on your version of TurboTax.
  4. Edit/Update the vehicle expense topic.
  5. Add a vehicle (or edit an existing vehicle).
  6. On the Here’s what we have from last year… screen or Let’s get some info about this vehicle screen select the box for I stopped using this vehicle in 20XX. Then enter the date you stopped using the vehicle in the box that appears.
  7. Continue and enter total miles and business miles for the current year. TurboTax will use your entries to determine the business use percentage for the vehicle.
    • If you used this vehicle for more than one business/rental, enter the same number of total miles, but only the miles driven for this business for “business miles.”
  8. Depending on how you reported this vehicle in the past, accept the SMR or enter your actual expenses.
  9. Enter any additional expenses such as parking, tolls, etc.
  10. On the Do any of these apply to [your vehicle]? screen select the box for Your percentage of business use of the vehicle varied over the years.
  11. Answer Yes to the question “Did you convert this asset to personal (nonbusiness) use?”
  12. You should be directed to enter this sale in another section of TurboTax, so skip to the end of the questions.
  13. Continue through to the Income Summary page and go to Other Business Situations (Business Items in TurboTax Desktop).
  14. Scroll down to Sale of Business Property.
  15. On the next screen, select Sales of business or rental property that you haven’t already reported.
  16. If you claimed a Section 179 deduction the first year you used the vehicle, also select the box for A recapture of a previously taken section 179 or listed property deduction.
  17. Complete the Listed Property page if actual expenses were claimed for the vehicle.
  18. Now, do some math:
    • The overall business use percentage for the life of the vehicle is calculated as the total business miles for all years you reported the vehicle divided by the total miles you drove the vehicle for all purposes.
    • The business portion of the selling price is the total selling price multiplied by the overall business use percentage you just calculated.
    • If you took the standard mileage rate (SMR) each year, you need to calculate the portion of that deduction that was depreciation because a part of the SMR is considered to be depreciation. For each year, multiply the business miles x the conversion rate:
      • Tax Year: Rate per mile
      • 2024: 0.30
      • 2023: 0.28
      • 2021-2022: 0.26
      • 2020: 0.29
    • If you used actual expenses, use the accumulated depreciation from the Depreciation and Amortization Report included with your TurboTax return. Sum the prior and current depreciation for your vehicle from that table.
  19. Continue the entry for the Sale of Business Property. 
  20. Add a sale and enter a description of the vehicle, the related dates, and the sales information:
    • Total Sales Price = business portion of selling price
    • Cost of property = original purchase price x business use percentage
    • Deprecation taken on this property = accumulated depreciation calculated earlier, less any recapture for Listed Property or Section 179.
  21. For What type of property is this? select the box for Property other than real estate that I took depreciation on.
  22. Skip the question about Form 1099-B.
  23. If your business use was less than 50% for any year that you used the vehicle for business, answer Yes for this question.
  24. Listed Property / Section 179 Recapture:
    • If you took Section 179 the first year you used the vehicle and the business use fell below 50% this year, you may be taxed on “depreciation recapture.” See the blue “how to compute” link for help on what to enter for these boxes.
    • If TurboTax determines that you need to report this recapture, see the blue “where to report” link for instructions on including this as other business/rental income.
    • If your vehicle is fully depreciated (original cost less accumulated depreciation = zero), enter the same amount for the Section 179 depreciation questions.
  25. If you have Listed Property Recapture or Section 179 Recapture, go back to the business or rental topic and include this amount as Other or additional income.

Gain or Loss is calculated as:

Business portion of the sales price (proceeds x business use percentage).

Less: Business portion of the original cost of the vehicle (Cost x business use percentage).

Less: Accumulated Depreciation, prior year plus current year.

Equals: Gain or Loss on Sale.

The remaining gain after deducting depreciation recapture is taxed at your capital gain rate. This amount is typically a long-term gain on Schedule D (if you held the vehicle for at least a year).

If using the personal use percentage shows that you have a gain, it is taxable. If you have a loss there is nothing to report. Example: if your business use is 60% and the personal use is 40%, calculate 40% of both the sales price and cost basis then subtract the cost basis from the sale price to see if there is gain (taxable) or loss (not reported).

If you’re using TurboTax Desktop, you can review your entries using Forms Mode. Look for Form 4797 and Enterable Form 4797 in the left column.