Tax ramifications are different when selling the old vehicle and when trading it in for a new vehicle.

It’s normal that business owners will eventually replace vehicles used in their business. However, keep in mind that when replacing a business vehicle, the tax ramifications are different when selling the old vehicle and when trading it in for a new vehicle.  If you sell the vehicle, the result is reported on your taxpayer’s return as an above-the-line gain or loss. Since a trade-in is treated as an exchange, any gain or loss is absorbed into the replacement vehicle’s depreciable basis, thereby avoiding any current taxable gain or reportable loss. (more…)