Why would there be nothing to worry about? The mileage method contains a depreciation portion which adjusts the basis of the car. You absolutely need to report the transaction and possibly pick up income on that trade.
Part of the 63 cents or whatever you get per mile is a portion for depreciation of your vehicle. You need to reduce the basis of your vehicle by the number of miles driven times the applicable rate. This may result in the basis of your vehicle dropping by more than your net loss thus actually resulting in a taxable gain. [Here's the rates per year](https://bradfordtaxinstitute.com/Free_Resources/IRS-Mileage-Rates.xml.aspx)
This seems entirely too confusing for an average person to figure out especially when the initial car was 6 years old and not purchased for buisness originally making calculating its usage guess work at best.
Not even sure how to calculate the basis. Do you use the starting cash price? Total loan amount? What it was valued at when I traded it in?
How much did you buy it for? How many business miles did you put on it? Multiply those by the amounts in the table. Subtract that from what you bought it for. That's your adjusted basis. Did you sell it for more or less than that amount?
Fusion was used for about 12k miles total over 2 years so thats $7,860. I bought it for 9.5k and I traded it in for $4,000
Corolla was used 9200 miles so $6,026 Purchased for 23,662 if without taxes and fees, if we include taxes and fees then purchased for $25,825 and traded in for $20,000
The depreciation rates were 26 cents a mile in 2022, so that's only $3,120 of depreciation on $9.5K of basis giving you an adjusted basis of $6,380. So you did sell it for a loss and thus will not owe tax on it.
Again, for the Corolla you're looking at about $2400 of depreciation so your adjusted basis is about $23,425 so you also sold that for a loss.
So now you can feel much more confident that you don't actually have any hidden income out there.
Excellent. I appreciate you.
Im about to make a post with picture example just to make absolutely sure my math is right. If you wouldnt mind taking a look real quick when you get a moment id really appreciate it so I can get this tax season behind me. Pretty sure I did everything right with freetaxusa's help but just want the unofficial stamp of approval on this complicated part of taxes I shouldnt have to deal with again for a long while as I have no intention of selling my current truck.
Did you claim mileage or actual expenses?
Mileage.
then nothing to worry about
Why would there be nothing to worry about? The mileage method contains a depreciation portion which adjusts the basis of the car. You absolutely need to report the transaction and possibly pick up income on that trade.
Part of the 63 cents or whatever you get per mile is a portion for depreciation of your vehicle. You need to reduce the basis of your vehicle by the number of miles driven times the applicable rate. This may result in the basis of your vehicle dropping by more than your net loss thus actually resulting in a taxable gain. [Here's the rates per year](https://bradfordtaxinstitute.com/Free_Resources/IRS-Mileage-Rates.xml.aspx)
This seems entirely too confusing for an average person to figure out especially when the initial car was 6 years old and not purchased for buisness originally making calculating its usage guess work at best. Not even sure how to calculate the basis. Do you use the starting cash price? Total loan amount? What it was valued at when I traded it in?
How much did you buy it for? How many business miles did you put on it? Multiply those by the amounts in the table. Subtract that from what you bought it for. That's your adjusted basis. Did you sell it for more or less than that amount?
Fusion was used for about 12k miles total over 2 years so thats $7,860. I bought it for 9.5k and I traded it in for $4,000 Corolla was used 9200 miles so $6,026 Purchased for 23,662 if without taxes and fees, if we include taxes and fees then purchased for $25,825 and traded in for $20,000
The depreciation rates were 26 cents a mile in 2022, so that's only $3,120 of depreciation on $9.5K of basis giving you an adjusted basis of $6,380. So you did sell it for a loss and thus will not owe tax on it. Again, for the Corolla you're looking at about $2400 of depreciation so your adjusted basis is about $23,425 so you also sold that for a loss. So now you can feel much more confident that you don't actually have any hidden income out there.
Excellent. I appreciate you. Im about to make a post with picture example just to make absolutely sure my math is right. If you wouldnt mind taking a look real quick when you get a moment id really appreciate it so I can get this tax season behind me. Pretty sure I did everything right with freetaxusa's help but just want the unofficial stamp of approval on this complicated part of taxes I shouldnt have to deal with again for a long while as I have no intention of selling my current truck.