If you sell a vehicle for which the Standard Mileage rate was used for deduction purposes in your business, there is a depreciation adjustment that must be made when accounting for the sale on your tax return. Because depreciation expense was already included in the Standard Mileage rate (the IRS figures it into the calculation of the rate each year), this depreciation amount must be calculated in order to adjust the basis of the vehicle when you sell that vehicle.
A good example of disposing of a vehicle on which you took the Standard Mileage deduction is in IRS Publication 463 Travel, Entertainment, Gift and Car Expenses, page 24.
To enter the information for the sale of the vehicle in the TaxAct program:
If, on the following screen titled Vehicles - Actual or Standard you select Standard, then you will not see the screens to enter the disposal information. This is because when taking the Standard Mileage rate, depreciation is not necessary as it's already included. Once you click Standard, from that screen you will want to click Continue or No until you reach the screen titled Asset Sale - Assets Sold. This is where you will enter the disposal information since depreciation was not entered in the previous section. Click Yes and proceed through the interview screens.
If, on the following screen Vehicles - Actual or Standard you select Actual, then you would just continue through the Q&A until you reach the screen titled Depreciation - Disposed to start entering the disposal information.
Per IRS Publication 463 Travel, Entertainment, Gift, and Car Expenses, page 23:
Disposition of a Car
If you dispose of your car, you may have a taxable gain or a deductible loss. The portion of any gain that is due to depreciation (including any section 179 deduction, clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), and special depreciation allowance) that you claimed on the car will be treated as ordinary income. However, you may not have to recognize a gain or loss if you dispose of the car because of a casualty or theft.
This section gives some general information about dispositions of cars. For information on how to report the disposition of your car, see Publication 544.
Note. Like-kind exchanges completed after December 31, 2017, generally are limited to exchanges of real property not held primarily for sale.
Casualty or theft. For a casualty or theft, a gain results when you receive insurance or other reimbursement that is more than your adjusted basis in your car. If you then spend all of the proceeds to acquire replacement property (a new car or repairs to the old car) within a specified period of time, you don’t recognize any gain. Your basis in the replacement property is its cost minus any gain that isn’t recognized. See Pub. 547 for more information.
Trade-in. When you trade in an old car for a new one, the transaction is considered a like-kind exchange. Generally, no gain or loss is recognized. (For exceptions, see chapter 1 of Pub. 544.) In a trade-in situation, your basis in the new property is generally your adjusted basis in the old property plus any additional amount you pay. (See Unadjusted basis, earlier in the publication.)
Depreciation adjustment when you used the standard mileage rate. If you used the standard mileage rate for the business use of your car, depreciation was included in that rate. The rate of depreciation that was allowed in the standard mileage rate is shown in the Rate of Depreciation Allowed in Standard Mileage Rate table, later. You must reduce your basis in your car (but not below zero) by the amount of this depreciation.
If your basis is reduced to zero (but not below zero) through the use of the standard mileage rate, and you continue to use your car forbusiness, no adjustment (reduction) to thestandard mileage rate is necessary. Use the fullstandard mileage rate (58 cents (0.58) per milefor 2019) for business miles driven.
TIP These rates don't apply for any year which the actual expenses method was used.
|Year(s)||Depreciation Rate per Mile|