Considering a last minute auto purchase for a write-off that includes a trade-in? Here’s an important change that can impact your taxes.
There were many changes buried within the 2018 Tax Act, this one in particular seems to have been forgotten in the mix, however it’s a big change for those of you looking to trade in an old business auto towards a swanky new upgrade.
In the past, the value received for a traded in vehicle was not taxable. Any value was factored into recording the cost of the new vehicle.
Under the new provisions, the trade value you receive is now taxable income. The trade value received is reduced by any original cost that was not deducted via depreciation in previous years.
For those of you that buy service trucks/cargo vans and fully write them off in the year of purchase, any trade value you get will be 100% taxable.
The tax rate is your ordinary income tax rate for those operating as S corporations, partnerships, single member LLCs and sole proprietors. C corporations are taxed at the flat 21% tax.
This change applies towards any trades during 2018 and on. This only applies to autos recorded on the books of a business as an asset. It does not apply to personal vehicles.