If you’re a sole proprietor, converting a business vehicle to personal use can trigger tax consequences you don’t expect.

Done right, the conversion itself may be a non-event—but what happens next can cost you deductions or create surprise recapture income.

Before you hand the keys to your spouse or retire that vehicle from business use, make sure you understand the rules that control gain, loss, and depreciation.

Here’s how the rules work.

Example 1: Convert Mileage-Rate Vehicle to Personal Use

Jim, a Schedule C taxpayer, converts his mileage-rate vehicle to personal use. On the date of conversion, this is a non-event for ... Log in to view full article.