It’s time to examine your existing business and personal (yes, personal) cars, SUVs, trucks, and vans for some profitable year-end business tax deductions.
In this article, we will first look at your prior and existing business vehicles that you or your pass-through business owns. Then, we will take a look at your personal vehicles as a possible source for a last-minute tax-saving deduction.
Let’s start with prior and existing business vehicles.
Your first step is to identify your gain or loss on sale. Once you have the gain or loss, know these basic rules:
Gains attributable to depreciation produce ordinary income.
Gains in excess of original basis produce capital gains. (This is unlikely to happen on most business vehicles, but it can happen with classic and antique business vehicles because they can go up in value.)
Losses on business vehicles produce ordinary deductions.
You report gains and losses on IRS Form 4797, which means those gains and losses travel outside of the business income and expense categories and thus have no effect on self-employment taxes.
Now you have the basic rules. In general, at this time of year we suspect you are looking for vehicle loss deductions, so that’s where we will look.
Described below are four existing-vehicle tax-deduction strategies that you may be able to use. As with all year-end strategies, don’t wait! If you want the deductions this year, you need to complete the required action on or before December 31, 2020. ... Log in to view full article.