Table of Contents
This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.
Transportation expenses include the ordinary and necessary costs of all of the following.
Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax home is defined in chapter 1.
Visiting clients or customers.
Going to a business meeting away from your regular workplace.
Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.
Transportation expenses do not include expenses you have while traveling away from home overnight. Those expenses are travel expenses discussed in chapter 1 . However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. See Car Expenses , later.
Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. However, there may be exceptions to this general rule. You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance.
You sometimes use your cell phone to make business calls while commuting to and from work. Sometimes business associates ride with you to and from work, and you have a business discussion in the car. These activities do not change the trip from personal to business. You cannot deduct your commuting expenses.
You regularly work in an office in the city where you live. Your employer sends you to a 1-week training session at a different office in the same city. You travel directly from your home to the training location and return each day. You can deduct the cost of your daily round-trip transportation between your home and the training location.
Your principal place of business is in your home. You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business.
You have no regular office, and you do not have an office in your home. In this case, the location of your first business contact inside the metropolitan area is considered your office. Transportation expenses between your home and this first contact are nondeductible commuting expenses. Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another.
If you use your car for business purposes, you ordinarily can deduct car expenses. You generally can use one of the two following methods to figure your deductible expenses.
Standard mileage rate.
Actual car expenses.
If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. See Leasing a Car , later.
In this publication, “car” includes a van, pickup, or panel truck. For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later.
It is given as an equipment maintenance allowance (EMA) to employees of the U.S. Postal Service.
It is at the rate contained in the 1991 collective bargaining agreement. Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation.
You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. For 2014, the standard mileage rate for the cost of operating your car for business use is 56 cents per mile.
You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. See chapter 6 for more information on reimbursements .
Larry is an employee who occasionally uses his own car for business purposes. He purchased the car in 2012, but he did not claim any unreimbursed employee expenses on his 2012 tax return. Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2014 to claim unreimbursed employee business expenses.
Use five or more cars at the same time (such as in fleet operations),
Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction),
Claimed a section 179 deduction (discussed later) on the car,
Claimed the special depreciation allowance on the car,
Claimed actual car expenses after 1997 for a car you leased, or
Are a rural mail carrier who received a qualified reimbursement. (See Rural mail carriers , earlier.)
Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time.
Tony and his employees use his four pickup trucks in his landscaping business. During the year, he traded in two of his old trucks for two newer ones. Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year.
Chris owns a repair shop and an insurance business. He and his employees use his two pickup trucks and van for the repair shop. Chris alternates using his two cars for the insurance business. No one else uses the cars for business purposes. Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time.
Maureen owns a car and four vans that are used in her housecleaning business. Her employees use the vans, and she uses the car to travel to various customers. Maureen cannot use the standard mileage rate for the car or the vans. This is because all five vehicles are used in Maureen's business at the same time. She must use actual expenses for all vehicles.
If you do not use the standard mileage rate, you may be able to deduct your actual car expenses.
Actual car expenses include:
If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Continue to keep records, as explained later in chapter 5 .
An ambulance, hearse, or combination ambulance-hearse used directly in a business,
A vehicle used directly in the business of transporting persons or property for pay or hire, or
A truck or van that is a qualified nonpersonal use vehicle.
The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction.
You can claim the section 179 deduction only in the year you place the car in service. For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use.
A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business.
In 2013, you bought a new car and used it for personal purposes. In 2014, you began to use it for business. Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2014. However, you can claim a depreciation deduction for the business use of the car starting in 2014. See Depreciation Deduction , later.
Peter purchased a car in April 2014 for $24,500 and used it 60% for business. Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later.
The amount of the section 179 deduction,
The section 179 deduction for sport utility and certain other vehicles, and
The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property.
Designed to have a seating capacity of more than nine persons behind the driver's seat,
Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or
That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.
In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use).
Your original tax return filed for the year the property was placed in service (whether or not you file it timely).
An amended return filed within the time prescribed by law. An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. The amended return must also include any resulting adjustments to taxable income.
You may be able to claim the special depreciation allowance for your car, truck, van, if it is qualified property and was placed in service in 2014. The allowance is an additional depreciation deduction for 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). The special depreciation allowance applies only for the first year the car is placed in service. To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later).
You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008;
You placed the car in service in your trade or business before January 1, 2015;
You used the car more than 50% in a qualified business use.
If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car.
You generally need to know the following things about the car you intend to depreciate.
Your basis in the car.
The date you place the car in service.
The method of depreciation and recovery period you will use.
It is directly connected with your business.
It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income).
It results in a payment of fair market rent. This includes any payment to you for the use of your car.
Determine the percentage of business use for the period following the change. Do this by dividing business miles by total miles driven during that period.
Multiply the percentage in (1) by a fraction. The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12.
You use a car only for personal purposes during the first 6 months of the year. During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Your business use for the year is 40% (80% × 6/12).
If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car.
You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. If you make this election, you treat the old car as disposed of at the time of the trade-in. The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. You then figure your depreciation deduction for the new car beginning with the date you placed it in service. You make this election by completing Form 2106, Part II, Section D. This method is explained later, beginning at Effect of trade-in on basis .
If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. You must apply two depreciation limits (see Depreciation Limits , later). The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. You must use Form 4562 to compute your depreciation deduction. You cannot use Form 2106, Part II, Section D. This method is explained in Publication 946.
Paul trades in a car that has an adjusted basis of $5,000 for a new car. In addition, he pays cash of $20,000 for the new car. His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier.
The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over
The total of the amounts actually allowed as depreciation during those years.
The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.
The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.
The straight line method (SL) over a 5-year recovery period.
Using the straight line method provides equal yearly deductions throughout the recovery period.
Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year.
You file your return on a fiscal year basis.
You file your return for a short tax year (less than 12 months).
During the year, all of the following conditions apply.
You placed some property in service from January through September.
You placed some property in service from October through December.
Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year.
You placed qualified property in service on an Indian reservation.
Phil bought a used truck in February 2013 to use exclusively in his landscape business. He paid $9,200 for the truck with no trade-in. Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years.
Phil used the MACRS depreciation chart in 2013 to find his percentage. The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2014 depreciation deduction of $1,840.
In 2014, Phil used the truck for personal purposes when he repaired his father's cabin. His records show that the business use of his truck was 90% in 2014. Phil used Table 4-1 to find his percentage. Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2014 depreciation deduction of $2,650.
There are limits on the amount you can deduct for depreciation of your car, truck, or van. The section 179 deduction and special
depreciation allowance are treated as depreciation for purposes of the limits. The maximum amount you can deduct each year
depends on the year you place the car in service. These limits are shown in the following tables.
|1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance.|
|2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance.|
|3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance.|
|4$7,660 if you acquired the car before 5/6/2003. $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance.|
|5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance.|
|1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,460 for 2014, $3,360 for 2013, and 2012, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003.|
|2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960.|
On September 4, 2014, Jack bought a used car for $10,000 and placed it in service. He used it 80% for his business, and he chooses to take a section 179 deduction for the car. The car is not qualified property for purposes of the special depreciation allowance.
Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%).
Jack then figures that his section 179 deduction for 2014 is limited to $2,528 (80% of $3,160). He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Jack has reached his maximum depreciation deduction for 2014. For 2015, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction.
In April 2008, Bob bought and placed in service a car he used exclusively in his business. The car cost $31,500. Bob did not claim a section 179 deduction or the special depreciation allowance for the car. He continued to use the car 100% in his business throughout the recovery period (2008 through 2013). For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table.
|If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your
2014 return for cars placed in service in 2014.
First, using the left column, find the date you first placed the car in service in 2014. Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter.
|For cars placed in service before 2014, you must use the same method you used on last year's return unless a decline in your
business use requires you to change to the straight line method. Refer back to the MACRS Depreciation Chart for the year you
placed the car in service. (See
Car Used 50% or Less for Business
Multiply the unadjusted basis of your car by your business use percentage. Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2014. (Also see Depreciation Limits .)
||If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. 1—Sept. 30 percentage instead of the Oct. 1—Dec. 31 percentage for your car.|
|To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. 1—Sept. 30 for figuring depreciation for your car. See Which Convention Applies? in chapter 4 of Publication 946 for more details.|
|Example. You buy machinery (basis of $32,000) in May 2014 and a new van (basis of $20,000) in October 2014, both used 100% in your business. You use the percentage for Jan. 1–Sept. 30, 2014, to figure the depreciation for your van. This is because the $20,000 basis of the property (van) placed in service after September is not more than 40% of the basis of all property placed in service during the year (40% × ($32,000 + 20,000) = $20,800).|
|Date Placed In Service||200% Declining
Balance (200% DB)1
Balance (150% DB)1
|Oct. 1 — Dec. 31, 2014||200 DB 5.0%||150 DB 3.75%||SL 2.5%|
|Jan. 1 — Sept. 30, 2014||200 DB20.0||150 DB15.0||SL10.0|
|Oct. 1 — Dec. 31, 2013||200 DB38.0||150 DB28.88||SL20.0|
|Jan. 1 — Sept. 30, 2013||200 DB32.0||150 DB25.5||SL20.0|
|Oct. 1 — Dec. 31, 2012||200 DB22.8||150 DB20.21||SL20.0|
|Jan. 1 — Sept. 30, 2012||200 DB19.2||150 DB17.85||SL20.0|
|Oct. 1 — Dec. 31, 2011||200 DB13.68||150 DB16.4||SL20.0|
|Jan. 1 — Sept. 30, 2011||200 DB11.52||150 DB16.66||SL20.0|
|Oct. 1 — Dec. 31, 2010||200 DB10.94||150 DB16.41||SL20.0|
|Jan. 1 — Sept. 30, 2010||200 DB11.52||150 DB16.66||SL20.0|
|Oct. 1 — Dec. 31, 2008||200 DB 9.58||150 DB14.35||SL17.5|
|Jan. 1 — Sept. 30, 2008||200 DB 5.76||150 DB 8.33||SL10.0|
|Prior to 20092|
|1 You can use this column only if the business use of your car is more than 50%.
2 If your car was subject to the maximum limits for depreciation and you have unrecovered basis in the car, you can continue to claim depreciation. See
Deductions in years after the recovery period under Depreciation Limits.
If you use your car 50% or less for qualified business use (defined earlier under Depreciation Deduction) either in the year the car is placed in service or in a later year, special rules apply. The rules that apply in these two situations are explained in the following paragraphs. (For this purpose, “ car ” was defined earlier under Actual Car Expenses and includes certain trucks and vans.)
You cannot take the section 179 deduction.
You cannot take the special depreciation allowance.
You must figure depreciation using the straight line method over a 5-year recovery period. You must continue to use the straight line method even if your percentage of business use increases to more than 50% in a later year.
In May 2014, Dan bought a car for $17,500. He used it 40% for his consulting business. Because he did not use the car more than 50% for business, Dan cannot take any section 179 deduction or special depreciation allowance, and he must use the straight line method over a 5-year recovery period to recover the cost of his car.
Dan deducts $700 in 2014. This is the lesser of:
$700 (($17,500 cost × 40% business use) × 10% recovery percentage (from column (c), Table 4-1 ), or
$1,264 ($3,160 maximum limit × 40% business use).
In June 2011, you purchased a car for exclusive use in your business. You met the more-than-50%-use test for the first 3 years of the recovery period (2011 through 2013) but failed to meet it in the fourth year (2014). You determine your depreciation for 2014 using 20% (from column (c) of Table 4-1 ). You also will have to determine and include in your gross income any excess depreciation, discussed next.
The amount of the depreciation deductions allowable for the car (including any section 179 deduction claimed and any special depreciation allowance claimed) for tax years in which you used the car more than 50% in qualified business use, minus
The amount of the depreciation deductions that would have been allowable for those years if you had not used the car more than 50% in qualified business use for the year you placed it in service. This means the amount of depreciation figured using the straight line method.
In September 2010, you bought a car for $20,500 and placed it in service. You did not claim the section 179 deduction or the special depreciation allowance. You used the car exclusively in qualified business use for 2010, 2011, 2012, and 2013. For those years, you used the appropriate MACRS Depreciation Chart to figure depreciation deductions totaling $12,685 ($3,060 for 2010, $4,900 for 2011, $2,950 for 2012, and $1,775 for 2013) under the 200% DB method.
During 2014, you used the car 30% for business and 70% for personal purposes. Since you did not meet the more-than-50%-use test, you must switch from the 200% DB depreciation method to the straight line depreciation method for 2014, and include in gross income for 2014 your excess depreciation determined as follows.
|Total depreciation claimed:
(MACRS 200% DB method)
|Minus total depreciation allowable:
(Straight line method)
|2010–10% of $20,500||$2,050|
|2011–20% of $20,500||4,100|
|2012–20% of $20,500||2,950|
|2013–20% of $20,500||1,775||-10,875|
For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” later, for the maximum amount of depreciation allowed each year.
In 2014, using Form 4797, you figure and report the $1,810 excess depreciation you must include in your gross income. Your adjusted basis in the car is also increased by $1,810. Your 2014 depreciation is $1,230 ($20,500 (unadjusted basis) × 30% (business use percentage) × 20% (from column (c) of Table 4-1 on the line for Jan. 1–Sept. 30, 2010)). However, your depreciation deduction is limited to $533 ($1,775 x 30% business use).
If you lease a car, truck, or van that you use in your business, you can use the standard mileage rate or actual expenses to figure your deductible expense. This section explains how to figure actual expenses for a leased car, truck, or van.
If you lease a car, truck, or van that you use in your business for a lease term of 30 days or more, you may have to include an inclusion amount in your income for each tax year you lease the vehicle. To do this, you do not add an amount to income. Instead, you reduce your deduction for your lease payment. (This reduction has an effect similar to the limit on the depreciation deduction you would have on the vehicle if you owned it.)
The inclusion amount is a percentage of part of the fair market value of the leased vehicle multiplied by the percentage of business and investment use of the vehicle for the tax year. It is prorated for the number of days of the lease term in the tax year.
The inclusion amount applies to each tax year that you lease the vehicle if the fair market value (defined next) when the lease began was more than the amounts shown in the following tables.
Cars (Except for Trucks and Vans)
|Year Lease Began||Fair Market Value|
Locate the appendix that applies to you. To find the inclusion amount, do the following.
Find the line that includes the fair market value of the car on the first day of the lease term.
Go across the line to the column for the tax year in which the car is used under the lease to find the dollar amount. For the last tax year of the lease, use the dollar amount for the preceding year.
Prorate the dollar amount from (1)(b) for the number of days of the lease term included in the tax year.
Multiply the prorated amount from (2) by the percentage of business and investment use for the tax year. This is your inclusion amount.
On January 17, 2014, you leased a car for 3 years and placed it in service for use in your business. The car had a fair market value of $32,250 on the first day of the lease term. You use the car 75% for business and 25% for personal purposes during each year of the lease. Assuming you continue to use the car 75% for business, you use Appendix A-5 to arrive at the following inclusion amounts for each year of the lease:
|Tax year||Dollar amount||Proration||Business use||Inclusion amount|
For each year of the lease that you deduct lease payments, you must reduce your deduction by the inclusion amount computed for that year.
On August 16, 2013, Will leased a car with a fair market value of $38,500 for 3 years. He used the car exclusively in his own data processing business. On November 5, 2014, Will closed his business and went to work for a company where he is not required to use a car for business. Using Appendix A-4 , Will computed his inclusion amount for 2013 and 2014 as shown in the following table and reduced his deductions for lease payments by those amounts.
|Tax year||Dollar amount||Proration||Business use||Inclusion amount|
|2013||$ 12||138/365||100%||$ 5|
In March 2012, Janice leased a car for 4 years for personal use. On June 1, 2014, she started working as a self-employed advertising consultant and started using the leased car for business purposes. Her records show that her business use for June 1 through December 31 was 60%. To figure her inclusion amount for 2014, Janice obtained an appraisal from an independent car leasing company that showed the fair market value of her 2012 car on June 1, 2014, was $21,650. Using Appendix A-5 , Janice computed her inclusion amount for 2014 as shown in the following table.
|Tax year||Dollar amount||Proration||Business use||Inclusion amount|
If you dispose of your car, you may have a taxable gain or a deductible loss. The portion of any gain that is due to depreciation (including any section 179 deduction, clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), and special depreciation allowance) that you claimed on the car will be treated as ordinary income. However, you may not have to recognize a gain or loss if you dispose of the car because of a casualty, theft, or trade-in.
This section gives some general information about dispositions of cars. For information on how to report the disposition of your car, see Publication 544.
Rate of Depreciation Allowed in Standard Mileage Rate
|Rate per Mile|
In 2009, you bought a car for exclusive use in your business. The car cost $22,500. From 2009 through 2014, you used the standard mileage rate to figure your car expense deduction. You drove your car 14,100 miles in 2009, 16,300 miles in 2010, 15,600 miles in 2011, 16,700 miles in 2012, 15,100 miles in 2013, and 14,900 miles in 2014. Your depreciation is figured as follows.
|Year||Miles x Rate||Depreciation|
|2009||14,100 × .21||$2,961|
|2010||16,300 × .23||3,749|
|2011||15,600 × .22||3,423|
|2012||16,700 × .23||3,841|
|2013||15,100 × .23||3,473|
|2014||14,900 × .22||3,278|
At the end of 2014, your adjusted basis in the car is $1,775 ($22,500 − $20,725).
|Jan., Feb., March||12.5%|
|April, May, June||37.5%|
|July, Aug., Sept.||62.5%|
|Oct., Nov., Dec.||87.5%|
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