cancel
Showing results for 
Search instead for 
Did you mean: 
302notaryservice
Level 1

I traded my car for a hybrid in September of 2021. Will this have any tax impact?

I use my vehicle primarily for business. I traded my high mileage SUV for a new hybrid and hope to realize tax benefits. Is this possible?
2 Comments 2
katherinejoyceO
QuickBooks Team

I traded my car for a hybrid in September of 2021. Will this have any tax impact?

Thanks for sharing your first concern in this thread, @302notaryservice

 

Since you're using the car for business only, you can deduct the entire cost of using it and use either the standard mileage rate or the actual expenses method in deducting it. 

 

I'd also recommend consulting your tax advisers to get some advice on how to report this type of payment and answer any tax-related questions.

 

For more details, you can go through the resources below to get more information about the difference between the two methods in QuickBooks Self-Employed and the Schedule C:

 

 

Feel free to message again if you have any follow-up questions. I'll be around to guide you some more.

Rainflurry
Level 13

I traded my car for a hybrid in September of 2021. Will this have any tax impact?

@302notaryservice 

 

Certainly, but there are options.  You really need someone experienced in this area to help you. 

 

You have the option of going with the standard mileage deduction which was $0.56/mile in 2021 and increases to $0.585/mile in 2022.  If you choose the standard mileage rate in the first year of vehicle use, you can choose either the standard mileage rate or the actual expense method in future years.  It may be helpful to figure your deduction both ways and see which saves you more.

 

Alternatively, you can go with the actual expense method which allows you to deduct the actual expenses associated with owning the vehicle in proportion to the mileage driven for business vs. personal use.  For example, if you use the vehicle 60% of the time for business, you can deduct 60% of the actual expenses - depreciation, payments, license tabs/registration fee, oil, gas, repairs, tires, etc.  It gets trickier when it comes to depreciation.  Section 179 depreciation allows a larger first-year deduction (up to $18,200 X percentage of business use).  But, you must take Section 179 the first year the vehicle is placed in service (2021) or you can't ever take it.  If you go that route, make sure you're aware of depreciation recapture so that you're not surprised by owing tax when you sell the vehicle in the future.  Again, I would suggest getting your own tax advice on this, it could potentially save you thousands in tax - especially if the vehicle is new and used primarily for business purposes.  Here are a few links for your reading pleasure:

 

IRS Pub. 463 - Travel, Gift & Car Expenses:

https://www.irs.gov/publications/p463#en_US_2021_publink100033971

 

IRS Topic No. 510 - Business Use of Car:

https://www.irs.gov/taxtopics/tc510

 

 

Need to get in touch?

Contact us