# Vehicle Depreciation Recapture



## Launchpad McQuack (Jan 8, 2019)

I have seen it mentioned in passing a couple times that if you claim the standard mileage-rate deduction then a portion of the per-mile deduction rate is allocated to depreciation. If you later sell the vehicle, you then have to recapture the depreciation that you claimed. How does that work? I want to make sure that I am keeping the records now that I will need to handle that situation when it eventually comes.


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## Trafficat (Dec 19, 2016)

I remember a discussion on this before. My car is about to be aged out, so I looked into this. The vehicle is considered to depreciate but it never can have a negative value. If you buy a car for $10,000, and it depreciates to $5000 based on the $0.27/mi depreciation (mileage depreciation changes each year but $0.27 is for 2020), and you sell it for $7000, you pay taxes on a $2000 profit. If you buy a car for $10,000, you claim the standard mileage deduction on 50,000 miles, the car is deemed to have $0 value, not a negative value (.27*50000=$13500, so value would be -$3500 if it could go negative.). So if you sell it for $7000, you pay taxes on making a $7000 profit, not on a $10500 profit.


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## Launchpad McQuack (Jan 8, 2019)

Trafficat said:


> If you buy a car for $10,000, you claim the standard mileage deduction on 50,000 miles, the car is deemed to have $0 value, not a negative value (.27*50000=$13500, so value would be -$3500 if it could go negative.). So if you sell it for $7000, you pay taxes on making a $7000 profit, not on a $10500 profit.


If you fully depreciate the vehicle, can you still take the full standard mileage-rate deduction for miles driven after the vehicle is fully depreciated, or do you have to reduce the standard mileage rate by the portion of the mileage rate that is allocated to depreciation since the vehicle no longer has any depreciable value?


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## Trafficat (Dec 19, 2016)

You can use the standard mileage deduction without adjustment even after it is fully depreciated.


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## UberTaxPro (Oct 3, 2014)

Launchpad McQuack said:


> If you fully depreciate the vehicle, can you still take the full standard mileage-rate deduction for miles driven after the vehicle is fully depreciated, or do you have to reduce the standard mileage rate by the portion of the mileage rate that is allocated to depreciation since the vehicle no longer has any depreciable value?


No you don't have to reduce the SMR - another advantage to using the SMR & older car - Basis reduction stops at 0, never negative.



Launchpad McQuack said:


> I have seen it mentioned in passing a couple times that if you claim the standard mileage-rate deduction then a portion of the per-mile deduction rate is allocated to depreciation. If you later sell the vehicle, you then have to recapture the depreciation that you claimed. How does that work? I want to make sure that I am keeping the records now that I will need to handle that situation when it eventually comes.


Basis gets reduced to 0 by depreciation taken but never negative. Tax returns & purchase info & any basis changes to vehicle is all you need for records. It works pretty much the same as when you recapture depreciation from a real estate sale. https://thismatter.com/money/tax/standard-mileage-rate.htm


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## NGOwner (Nov 15, 2016)

Can one assume that one avoids all the Vehicle Depreciation Recapture nonsense, if the vehicle is

1) Totaled in an accident?
2) Donated to a used parts lot when a repair costs more than the owner wants to spend?
3) Gifted to a family member (spouse, son, daughter, sibling)?
4) Gifted to anyone (as long as it is under the annual gift tax limit)?

In essence, if the vehicle is never "sold"?

[NG]Owner


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## oldfart (Dec 22, 2017)

Trafficat said:


> You can use the standard mileage deduction without adjustment even after it is fully depreciated.


Exactly


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## wallae (Jun 11, 2018)

Get them to allow zero or 50 dollars in trade but
Take 2000 off the price of new car?


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## Stevie The magic Unicorn (Apr 3, 2018)

The standard mileage rate for 250,000 miles is $143,750 assuming 100% use.

Let's take 15c a mile off for fuel costs, thats $37,500 in fuel costs for a van/minivan. Worst case scenario for fuel.

That leaves you $106,250. Take $30,000 for a new Toyota Sienna van. That leaves you $76,000 for out of warranty repairs/maintenance.

Let's assume 25% personal use of the 143,750, that knocks 40,000 for after warranty repairs and your maintenance.


SRM is sufficient to cover your actual expenses on a new car driven for 250,000 miles.

The big issue is that 80,000 paid miles only pays out $60,000 here...


A quick estimate leaves me writing off $40,000 minus repair costs over actual expenses using SRM. I'm also assuming that at 250,000 your towing that POS to a scrap yard and getting $100 over the cost of the tow.


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## Saltminer (Mar 3, 2018)

I believe this is all wrong; there is no recapture of depreciation if you use standard mileage deduction, just as there is no depreciation recapture if you use the straight line method for other types of assets. You only recapture deprecation IF you have used a method that accelerates depreciation beyond normal depreciation. The depreciation component of the standard mileage deduction is "administratively conclusive" against both you and the service. In other words, the entire point of a standard mileage deduction is so that you don't get into the whole mess of values and basis but rather have an administratively convenient method of calculation of expense and depreciation.. This changes if 1) you are using more than 5 vehicles in a business; or 2) you change depreciation methods. But for Joe Uber Driver; there is no recapture


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