# Actual Expenses or Standard IRS mileage vs. Depreciation when car is sold???



## Chocoholic (Aug 7, 2018)

Any accountants, CPAs or tax attorneys watching????

Has anyone ever done an analysis if it's better to use the standard IRS mileage rate or actual expenses when you take into consideration the depreciation calculations at the time the car is taken out of business service or sold?

I just finished my taxes (TTAX SE), and was caught offguard by the added calculations related to vehicle depreciation. It involves calculating the depreciation value in the IRS standard mileage rates over past years, the percentage driven for business, personal mileage (You should ALWAYS record your odometer reading on Jan 1), the value of the car when placed in service for business, etc. etc.

It gave me a 3 day headache, and made me think. Has anyone done studies, or even best guess analysis of the impact of using the standard mileage rate vs. actual expenses when adding in the impact of the end of use depreciation, sale and cap gain/loss on the car?

I never thought about what happens when I sold the car (actually, sold it as-is after the engine blew). Imagine my surprise when the software told me my car was fully depreciated and it added the $4000 sale price (based on percentage use current year) as cap gains! &#128561;

So, any of you tax _experts_ out there have any input, insight, advice or recommendations? Sure, using the IRS standard mileage rate is easy and gives a great tax advantage up front, but is the back end bite worth it, or would we be better to use actual expenses? Seems like a pay me now or pay me later. Which is worse?

Before you say it, of course it depends on individual numbers! A 10 year old Prius vs. a new Escalade are going to be very different. But for sake of argument, let's assume the most common Uber driver with a used Prius of more than 4 years old. :cafe:


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## WEY00L (Mar 6, 2019)

Chocoholic said:


> Any accountants, CPAs or tax attorneys watching????
> 
> Has anyone ever done an analysis if it's better to use the standard IRS mileage rate or actual expenses when you take into consideration the depreciation calculations at the time the car is taken out of business service or sold?
> 
> ...


The time value of money.
The tax deduction you took will reduce your taxes in years 1-4.
In year 5 you have to pay capital gains if any.
Better to get the deduction up front and pay the cap gains later.

As far as using actual expenses go you will still depreciate your vehicle.
In the case of R/S drivers the IRS deduction should be higher than actual expenses.
The IRS rates are based on 12,000 miles per year.
The more miles you drive the less per mile your depreciation will be if using actual.


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## Subjugator (Jun 22, 2016)

Simple math. Purchase at x sell at y, if y is less than x then you don't owe any gains or really don't need to report it as gains. Uber uses personal cars anyways. It shouldn't be a gain.


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## wallae (Jun 11, 2018)

WEY00L said:


> The time value of money.
> The tax deduction you took will reduce your taxes in years 1-4.
> In year 5 you have to pay capital gains if any.
> Better to get the deduction up front and pay the cap gains later.
> ...


How does donating the car/giving away to a child/junkyard the car fit into that?


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## Seamus (Jun 21, 2018)

Chocoholic said:


> Any accountants, CPAs or tax attorneys watching????
> 
> Has anyone ever done an analysis if it's better to use the standard IRS mileage rate or actual expenses when you take into consideration the depreciation calculations at the time the car is taken out of business service or sold?
> 
> ...


You aren't the first to discover this. TT must have incorporated this into whatever version software you're using this year. Prior to this year I had never heard anyone report this on the UP forum. Now, you are the third to report it.

I will give you non cpa advice. Unless you'r a schedule S or C Corp and need to write assets off the books I would choose not to report the sale of the vehicle.

I put this in the same category as "I don't report cash tips".



Subjugator said:


> Simple math. Purchase at x sell at y, if y is less than x then you don't owe any gains or really don't need to report it as gains. Uber uses personal cars anyways. It shouldn't be a gain.


True for a personal vehicle but not for a vehicle used for business. A vehicle used for business has to account for depreciation already written off when calculating gain/loss on the sale of an asset. Essential you can't deduct depreciation value twice.

It's big boy accounting that I would never get involved with unless an S or C Corp.


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## Older Chauffeur (Oct 16, 2014)

I think @UberTaxPro has covered this recently in his "ask me anything" thread. Search for depreciation and put ubertaxpro in the member box. It will turn up the discussions.


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## Seamus (Jun 21, 2018)

Older Chauffeur said:


> I think @UberTaxPro has covered this recently in his "ask me anything" thread. Search for depreciation and put ubertaxpro in the member box. It will turn up the discussions.


Based on another members post who got the same "surprise"! :roflmao:


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## WEY00L (Mar 6, 2019)

Seamus said:


> You aren't the first to discover this. TT must have incorporated this into whatever version software you're using this year. Prior to this year I had never heard anyone report this on the UP forum. Now, you are the third to report it.
> 
> I will give you non cpa advice. Unless you'r a schedule S or C Corp and need to write assets off the books I would choose not to report the sale of the vehicle.
> 
> ...


All good points.

Keep in mind if you are going to follow the* free *tax advice of @Subjugator you get what you pay for.....and sometimes you get even less.


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## Dave Bust (Jun 28, 2017)

I have been doing uber for over 5 years and never paid 1 cent in taxes

you can deduct EVERYTHING

I Have even written off my "guard" dog expenses


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## Jon Stoppable (Dec 11, 2019)

Bear says standard can be better, because the depreciation component of the mileage deduction cannot reduce the car's basis below zero. After that, that amount is free deduction, like excess depletion in an oil well!

Also, trade in your car and you can extend those good vibrations forever!


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## Subjugator (Jun 22, 2016)

I would just check the irs pub about this kind of stuff. I dug into it to figure out what I can deduct besides the standard miles like the interest portion of a car payment when the car payment itself isn't deductible because of standard irs includes that kind of stuff. But the interest portion for example is done by % bussiness use. And to get the % just have to figure out % of miles used for bussiness. 

I'm not sure what u did wrong in TurboTax I use credit karma. Maybe u glitched something to tax you on something you shouldn't have been taxed on, or for example u somehow turned the car into a pure business asset instead of owning it personally. Maybe it just part of depreciation side of the rules. I use standard since depreciation side makes no sense to use unless a car is really really expensive.


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