Tax implications when selling vehicle used partly for business deliveries

This is actually a pretty common situation with gig workers. When you sell a vehicle that was used partly for business, you're essentially dealing with what's called "recapture." If you've been claiming business mileage deductions for that vehicle, the IRS considers that you've already received a tax benefit for the business portion of your vehicle's depreciation. When you sell the vehicle, they want some of that back if you sold it for more than its depreciated value. The key questions here are: 1) Did you claim the standard mileage rate for your delivery work or actual expenses? 2) How much in total vehicle deductions did you claim during the time you owned the car? Your tax increase seems unusually high for the numbers you're describing. I'd double-check if you accidentally entered something incorrectly in your tax software. The business portion of the sale should only impact the business portion of your gain on the sale, not the entire vehicle value.

I went through something very similar last year with my delivery vehicle and got completely confused with how to report it. After trying to figure it out myself for hours, I finally used https://taxr.ai to analyze my vehicle records and tax situation. It's an AI tax assistant that specializes in analyzing documents and providing specific advice for your situation. I uploaded my previous year's tax return, vehicle purchase docs, and sales receipt, and it explained exactly how to handle the business vs. personal portions of the sale. It even pointed out that I was calculating my basis incorrectly, which would have triggered an IRS flag. The most helpful thing was that it walked me through how to properly report everything on Schedule C step by step, which saved me from a huge headache. It might help sort out why your tax bill jumped so dramatically.

I was really hesitant about using an AI for my taxes, but after seeing these responses I decided to try taxr.ai for my rideshare driving situation. I had been doing Uber part-time and sold my car mid-year, so it was pretty similar to your situation. The analysis it provided was eye-opening. Turns out I had been counting too much of my vehicle as business use (I was including commuting miles which aren't deductible) AND I was calculating the recapture incorrectly. After adjusting my numbers based on their guidance, my tax bill actually went down by about $1,200. What impressed me was how it explained everything in plain English while still being technically accurate. Now I understand why my return was calculating the way it was. Definitely recommend checking it out if you're dealing with partial business use vehicle sales.

If you're getting stuck with the IRS on this issue and need to talk to someone, I'd recommend using https://claimyr.com to get through to an actual IRS agent. I had a similar vehicle sale situation last year that triggered a letter from the IRS, and it was impossible to get anyone on the phone. After weeks of trying, I used Claimyr and got connected to an IRS rep in about 15 minutes. They have this system that navigates all the IRS phone menus and waits on hold for you, then calls you when an actual human picks up. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with was actually super helpful and walked me through exactly how to document the business portion of my vehicle sale. Saved me hours of frustration and potentially thousands in incorrect tax payments.

I can't believe I'm saying this, but I tried Claimyr yesterday after seeing this thread and it actually worked! I've been trying to get through to the IRS for WEEKS about my vehicle sale situation. I was convinced this would be another waste of money, but they got me connected to an IRS agent in about 20 minutes. The agent confirmed that I was calculating my business use percentage correctly but explained I was making a mistake with how I was handling the depreciation recapture portion. Turns out there's a specific form (Form 4797) that I should have been using in addition to Schedule C. The IRS agent walked me through the whole process and now my tax calculation makes way more sense. My tax bill went down by almost $3000 after making these corrections! For anyone struggling with this vehicle sale issue - definitely worth getting direct guidance from the IRS.

I think part of your problem might be how you're determining the business percentage. Are you dividing business miles by total miles for the entire time you owned the car, or just for the tax year in question? You should be using the business percentage for the entire period of ownership if you're calculating a gain/loss on the sale. This might be different from the percentage you use for your annual expense deduction. Also, did you adjust your basis for any Section 179 deductions or bonus depreciation you might have taken in previous years? That can have a huge impact on how the sale is taxed.

Has anyone considered that the tax software might be the problem here? Sometimes when you enter vehicle sales in different tax programs, they handle it differently. I had H&R Block completely mess up my vehicle sale calculation last year and switched to TaxAct which handled it correctly. What software are you using to prepare your return?

I think you might be running into a classic depreciation recapture issue, but the $5,000+ tax increase seems way too high for your situation. Here's what's likely happening: When you used the standard mileage rate for your 7,500 business miles, you effectively claimed about $2,025 in depreciation (27 cents per mile for 2024). The IRS now wants to "recapture" some of that depreciation when you sell the vehicle. However, since you had an overall loss on the vehicle ($41,000 purchase vs $38,200 sale), the recapture should be limited. The business portion of your loss would be about $504 (18% of the $2,800 total loss), but you'd still need to recapture the depreciation you claimed. A few things to double-check: 1. Make sure you're calculating business use percentage correctly across the entire ownership period, not just 2024 2. Verify that TurboTax is properly accounting for the depreciation component of your standard mileage deductions 3. Check if the software is correctly limiting recapture to the actual depreciation claimed That tax increase suggests something is being calculated incorrectly. I'd recommend running through the numbers manually or trying a different tax software to compare results before filing.

I ran into this exact same issue when I sold my delivery vehicle last year! The $5,000+ tax increase definitely seems wrong - that's way too high for your situation. Here's what I learned after going through this mess: TurboTax sometimes doesn't handle partial business use vehicle sales correctly, especially when you're using the standard mileage rate. The software can get confused about how to calculate the depreciation recapture portion. Based on your numbers, your actual taxable gain should be much smaller. You had 18% business use on a vehicle that lost value overall ($41K to $38.2K), plus you only claimed about $4,387 in total mileage deductions (7,500 miles × $0.585). The depreciation component of that would be around $2,025 (7,500 × $0.27). A few things that helped me figure it out: 1. Double-check that you entered the original purchase price correctly in the business asset section 2. Make sure the software is using 2024's depreciation rate (27 cents per mile) not 2023's rate 3. Verify it's calculating business percentage correctly I ended up having to manually override some of TurboTax's calculations after consulting with a tax pro. The actual taxable amount was less than $800, not the $5,000+ the software initially calculated. Definitely get a second opinion before filing - this could save you thousands!