Questions about selling a vehicle after taking Section 179 deduction in 2024 - Tax liability implications?

The tax implications when selling or trading in a vehicle you've taken Section 179 on can be confusing, but I'll try to make it clear. When you sell/trade a Section 179 vehicle, you'll need to report a "recapture" of the deduction, but only for the gain portion. This is essentially treating the previously deducted amount as ordinary income. For your Sequoia situation, you'd calculate the difference between your trade-in value and the adjusted basis (which is likely very low since you fully depreciated it with Section 179). That difference is what gets recaptured as ordinary income. Regarding offsetting with another Section 179 vehicle - yes, purchasing another qualifying vehicle would give you a new deduction that could help offset the recapture income from the Sequoia. However, these are technically separate transactions on your tax return.

I went through almost the exact same situation last year with my business vehicle. I checked out https://taxr.ai after another business owner recommended it, and it was super helpful for understanding the Section 179 recapture rules. I uploaded my previous year's return where I'd taken the Section 179 deduction on my truck, and the AI explained exactly what would happen if I sold it. Basically confirmed what the other comment said - you'll pay taxes on the difference between what you get for the vehicle and your adjusted basis (which is probably close to zero). The best part was that it showed me how buying another qualifying vehicle would offset some of the tax hit. In my case, I ended up trading my $65K truck for a $45K more efficient SUV, took another Section 179 deduction, and it worked out pretty well tax-wise.

Just wanted to update after trying taxr.ai from the recommendation above. It actually cleared up a lot of confusion I had about the Section 179 recapture rules! I uploaded my 2024 return where I had taken the deduction on my business SUV, and it showed me exactly what would happen if I sold it this year versus next year. The difference was pretty significant tax-wise. What I found most helpful was the explanation of how to time the purchase of a new business vehicle to offset the recapture income. Planning to trade in my current vehicle and purchase a more efficient one before year-end, which should minimize the tax hit according to the analysis. Definitely saved me from making an expensive tax mistake - and saved me from that $300/hour CPA consultation I was dreading!

I had a similar recapture situation last year with my Section 179 vehicle. After weeks of trying to get answers from the IRS (kept getting disconnected or waiting for hours), I found this service called Claimyr at https://claimyr.com that got me through to an actual IRS agent in about 15 minutes. They have this system that monitors the IRS phone lines and calls you back when they can get you through - you can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent was able to verify exactly how I needed to report the recapture on my return and confirmed I needed to use Form 4797. Definitely worth it since I was getting different answers from various tax software programs and online forums.

Ok I have to eat my words. After posting my skeptical comment yesterday, I decided to try Claimyr because I was desperate to resolve my Section 179 question before filing my amended return. The service actually worked exactly as described. I got a call back in about 20 minutes, and they connected me directly to an IRS agent who specialized in business returns. I explained my situation with selling a vehicle I'd taken Section 179 on mid-year, and they walked me through exactly how to calculate the recapture amount and which forms to use. Saved me from making a $12,000 mistake on my taxes - I was planning to just report the income from the sale without properly handling the recapture calculation. The agent even emailed me some documentation afterward. Definitely worth it for complicated tax situations where you need official guidance directly from the IRS.

Has anyone here dealt with partial business use recapture with Section 179? I took the deduction on my truck (75% business use) and now might sell it, but I'm not sure how to calculate the recapture since it wasn't 100% business.

Quick question - does anyone know if you can do a 1031 exchange with a Section 179 vehicle to defer the recapture tax? Thinking about switching from my F-350 to a Rivian truck for my construction business.

For your specific situation with the Sequoia, here's what you need to know: If you took the full Section 179 deduction, your adjusted basis is essentially $0. When you trade it in, the entire trade-in value becomes taxable ordinary income subject to recapture. However, purchasing another Section 179-eligible vehicle can definitely help offset this tax hit. The key is timing - if you can complete both transactions in the same tax year, you'll get the deduction from the new vehicle to offset the recapture income from the old one. A few strategic considerations: - If possible, try to purchase the new vehicle before or simultaneously with trading in the Sequoia - Make sure the new vehicle meets Section 179 requirements (over 6,000 lbs GVWR for most passenger vehicles) - Consider whether you want to take the full Section 179 deduction again or spread it out with regular depreciation Since you're looking at something more fuel-efficient and less expensive, this could work out well - you'll have recapture income from the Sequoia but a new deduction from the replacement vehicle, potentially resulting in a net tax benefit depending on the price difference. Given the complexity and potential tax impact, it might be worth running the numbers with a tax professional before making the final decision.

This is such a common dilemma for business owners! I went through something similar with my consulting business last year. The key thing to remember is that Section 179 is essentially "borrowing" from future tax years - you get the deduction upfront but pay it back if you sell early. One strategy that worked well for me was doing a careful cash flow analysis before making the switch. Calculate not just the immediate tax hit from recapture, but also factor in the fuel savings and lower maintenance costs of a more efficient vehicle over the next few years. Sometimes the operational savings can offset the tax burden. Also consider the depreciation trajectory - luxury vehicles like the Sequoia tend to depreciate faster initially, so if you're thinking about switching anyway, sooner might be better than later from a pure dollar perspective. Since you're in real estate, another angle to consider is whether the new vehicle better fits your client-facing needs. A more efficient, newer vehicle might actually help your business image while providing tax benefits. Just make sure whatever you choose still meets that 6,000+ lb GVWR requirement if you want to take Section 179 again.