Article Date:
April 2016

Word Count:



1031 Tax Program for Vehicles


Editor’s Update: 1031 exchanges for vehicles and equipment were allowed prior to January 1, 2018. See Tax Reform Eliminates Tax Benefits of Business Vehicle Trade-Ins.


All Exchanges Work, Including Delayed and Reverse Starker Exchanges


Want to pay less tax?


You can.


First, would the sale of your existing business vehicle produce a gain or loss?


Don’t know? See the article Tips for Best Tax Result on Vehicle Disposition for how to calculate your gain or loss.


Loss. Sell the vehicle to claim the loss deduction.


Gain. Use a trade-in or other Section 1031 exchange to defer taxes on some or all of the gain.


Big, Surprising Gains


More people will pay more tax on their vehicles this year than in other recent years.


Why? Many taxpayers used Section 179 expensing and/or bonus depreciation on their 2012, 2013, 2014, and 2015 vehicles. That made for bigger, faster deductions, and sometimes total write-offs. But now those taxpayers have an asset with a low basis and a tax problem if they sell.


Example. Say you paid $50,000 for a fancy pickup truck in 2012 that you totally wrote off as a business expense. You can sell the truck for $26,000 today. If you do that, you have a $26,000 gain taxed at ordinary rates ($26,000 selling price - $0 adjusted basis).


You probably don’t want to pay taxes on that gain. And the good news is that you don’t have to. You can do what lots of real estate investors do. You can use one of four types ... Log in to view full article.

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