profile

R.S.K. Tax & Consulting, LLC

Business Vehicle Trade-Ins: What You Need to Know for Tax Season

Published 22 days ago • 1 min read

Maximize Your Tax Benefits When Trading in a Business Vehicle

If you’re considering trading in your business vehicle for a new one, it’s essential to understand the tax implications. The way your trade-in is treated depends on factors like depreciation, deductions, and business use percentage. Here’s what you need to know:

  • Section 179 & Bonus Depreciation: If your current vehicle was expensed using Section 179 or bonus depreciation, trading it in may trigger taxable gains. If you deducted the full purchase price upfront, the trade-in value might be considered taxable income.
  • Trade-In vs. Selling: The IRS no longer allows like-kind exchanges for vehicles. This means if you trade in a depreciated vehicle, any remaining depreciation could be taxable. However, if you sell the vehicle separately, you may have more control over how gains are reported.
  • New Vehicle Deductions: The good news? Your new business vehicle may still qualify for Section 179 or bonus depreciation, depending on its use and weight class. Vehicles over 6,000 pounds may be eligible for 100% bonus depreciation in the year of purchase.
  • Mileage vs. Actual Expenses: If you previously used the mileage deduction method, the tax treatment of your trade-in might differ. Switching to actual expenses for the new vehicle could allow you to deduct depreciation, fuel, maintenance, and insurance.
  • Record Keeping Matters: Maintain proper documentation of purchase price, trade-in value, and business use percentage to maximize your deductions. Keeping a detailed log of mileage and business expenses can also help support your tax deductions in case of an audit.
  • Impact on Self-Employed vs. Corporations: If you’re a sole proprietor or single-member LLC, the tax impact of a trade-in is reported differently than if your business is a corporation. Corporate-owned vehicles may require additional considerations for shareholder benefits and business deductions.

Proper planning can help you avoid unexpected tax liabilities. Need guidance on how to handle your business vehicle trade-in? Contact RSK TAX & CONSULTING, LLC today for expert advice.

CTA: Schedule a consultation today to ensure you’re making the best financial moves for your business!

​

​

520 White plains Road Suite 500 Tarrytown, NY 10591
​Unsubscribe · Preferences​

R.S.K. Tax & Consulting, LLC

Read more from R.S.K. Tax & Consulting, LLC

Why Filing a Tax Extension Might Be the Smartest Move You Make in 2025 Filing your taxes may feel like a race against time, but rushing to file can cost you. Many people think filing a tax extension is just a way to procrastinate, but in reality, it can be one of the smartest financial moves you make. Filing an extension allows you to get the details right, save money, and avoid penalties. Here’s why it could be the right move for you in 2025. 1. Rushing Your Taxes = Costly Mistakes When you...

1 day ago • 2 min read

Maximize Your Profits: Top Tax Saving Strategies for Small Business Owners in 2025 As we step into 2025, it's more important than ever to have a solid tax strategy in place. The right tax-saving measures can significantly reduce your tax liability, freeing up funds to reinvest in your business or put toward your long-term goals. Here’s a guide to some effective tax-saving strategies for small business owners this year. 1. Take Advantage of the 100% Deduction for Home Office Expenses If you...

8 days ago • 2 min read

Make the Most of Your Health Insurance Tax Did you know that some of your health insurance expenses may be tax-deductible? If you're self-employed, run a business, or have significant medical expenses, you might qualify for valuable deductions that can lower your tax bill. What Health Insurance Costs Are Deductible? Self-Employed Health Insurance Deduction – If you're self-employed and not eligible for employer-sponsored coverage, you may be able to deduct your health insurance premiums for...

15 days ago • 1 min read