Standard deduction for auto expenses...not so fast.

CaptainToo

Well-Known Member
For the tax expensing of auto expenses,can anyone share an example of itemization versus standard deduction? Last year I sold my prior Uber car and am surprised at the tax result.

Last year I followed the general consensus to use the standard mileage deduction. For this year, I have to account for the sale of my prior Uber vehicle, and I realize that the depreciation parts of the standard deduction ($.26/mile) can come back as income to the extend it exceeds the loss of the car's value. If you have low actual depreciation in value, you can end up with a tax surprise.

My general situation.
I bought the car at the in 2017 for $14,000 and sold it at the end of 2019 for $8,000, a loss of value of $6,000.
I drove 25,000/year Uber, in using the standard mileage deduction, I Have recognized and deducted (50,000 x $0.26) $13,000 in tax depreciation.

For my 2019 taxes, I need to recognize the difference between the actual loss in value ($6,000) and the tax depreciation ($13,000) as a taxable gain of $7,000.

Am I missing this, or is the question of the standard deduction not so cut and dry?.
 

CaptainToo

Well-Known Member
The mileage deduction is $.58 per mile.
Correct, but the little secret is that the IRS considers $0.26 of that as specifically car depreciation, and when you sell the car, if you dont have that much loss in value, you end up paying taxes on the difference, so the eventual value of the standard deduction could end up closer to $.32/mile, which your actual vehicle costs might exceed..
 

oldfart

Well-Known Member
The mileage deduction is $.58 per mile.

yes ithe standard deduction is $0.58. It includes gas and Insurance and oil changes and tires and other maintenance and repairs

it also includes depreciation which is all we are talking about here
 

Jon Stoppable

Well-Known Member
The question, do you have gas & maintenance costs at more than $0.32 per mile? If so, I sure hope you aren't driving X! If not, then the standard mileage rate is still a benefit.

But yeah, that reduction in basis from the $0.26 per mile can bite you in the butt ... *but*, if you trade for another car, then the gain just reduces your basis in the new car; the gain is "deferred" that way. Which you don't care about, because you're going to take the standard mileage rate again! Just make sure you comply with the like-kind exchange requirements, which you should if you do a dealer trade.
 

oldfart

Well-Known Member
For the tax expensing of auto expenses,can anyone share an example of itemization versus standard deduction? Last year I sold my prior Uber car and am surprised at the tax result.

Last year I followed the general consensus to use the standard mileage deduction. For this year, I have to account for the sale of my prior Uber vehicle, and I realize that the depreciation parts of the standard deduction ($.26/mile) can come back as income to the extend it exceeds the loss of the car's value. If you have low actual depreciation in value, you can end up with a tax surprise.

My general situation.
I bought the car at the in 2017 for $14,000 and sold it at the end of 2019 for $8,000, a loss of value of $6,000.
I drove 25,000/year Uber, in using the standard mileage deduction, I Have recognized and deducted (50,000 x $0.26) $13,000 in tax depreciation.

For my 2019 taxes, I need to recognize the difference between the actual loss in value ($6,000) and the tax depreciation ($13,000) as a taxable gain of $7,000.

Am I missing this, or is the question of the standard deduction not so cut and dry?.

Pretty sure you have it right. I got caught with depreciation recapture some time ago with rental real estate. I thought I was so smart to use accelerated depreciation and pay no taxes on my income. But then came the day I sold

there used to be a commercial for Texaco that made the point “you can pay me now or you can pay me later”. You have fallen into the pay me later camp

you can take comfort in the fact that if you ha used actual expenses you would have probably paid more tax over those two years than you are paying now

those of us that drive our cars until they are junk or give them to a charity when we are done with them don’t have to face this problem
 

Trafficat

Well-Known Member
For my 2019 taxes, I need to recognize the difference between the actual loss in value ($6,000) and the tax depreciation ($13,000) as a taxable gain of $7,000.

Hmm, is that really how it works? If so it seems if I sold my car for $1, I would suddenly have a taxable gain of thousands of dollars since the deductions should give it a negative value. Am I expected to pay someone thousands of dollars to take the car off my hands?
 

Stevie The magic Unicorn

Well-Known Member
250k miles here 0 value. I'll take the miles and eitc maxed out when I can.


Yeah but if you put in another 100,000 miles onto that car odds are that you'll burn $10,000 in gas, change your tires a couple of times, do like 20 oil changes, and more than likely something is going to blow up, that you might be dumb enough to pay to have fixed.

So $56,000 in deductions.... sure you can't depreciate it anymore but it won't run itself for free.
 

Subjugator

Well-Known Member
Yeah but if you put in another 100,000 miles onto that car odds are that you'll burn $10,000 in gas, change your tires a couple of times, do like 20 oil changes, and more than likely something is going to blow up, that you might be dumb enough to pay to have fixed.

So $56,000 in deductions.... sure you can't depreciate it anymore but it won't run itself for free.

I'll get a new car when it makes sense to. I bought it new ended up doing uber. So far I may have spent a bit replacing brakes and tires but it isn't that bad. The gas is what is the killer. The beauty of them miles deductions is lowering income to get to eitc maxed out. Having kids helps with this insanely. There's the gas and repair funds.
 

oldfart

Well-Known Member
Hmm, is that really how it works? If so it seems if I sold my car for $1, I would suddenly have a taxable gain of thousands of dollars since the deductions should give it a negative value. Am I expected to pay someone thousands of dollars to take the car off my hands?
Yes
 

FLKeys

Well-Known Member
Are you sure you need to recapture depreciation when using standard mileage deduction? I though I read otherwise. That was one of the benefits of standard mileage deduction.
 

Trafficat

Well-Known Member
I found this article on microsoft's website. Seems the guys on here saying we have to recapture the std. mileage deduction part associated with depreciation are right unless you use the vehicle as a trade-in:


microsoft said:
To determine how much depreciation you’ve taken, multiply the total business miles you drove the car by the amount of the standard mileage rate that accounts for devaluation. These amounts appear in a chart in IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.
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So if I give the car away for free, am I still subject to taxable gain?
I'm just guessing here, but since I can give my friend $15,000 without being subject to gift tax, I should be able to give him a vehicle worth -$15,000 without myself being subject to a gift tax from his gift of my car to him.
 
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