Discussion:Standard mileage deduction -- fully depreciated vehicle

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Discussion Forum Index --> Tax Questions --> Standard mileage deduction -- fully depreciated vehicle


Dennis (talk|edits) said:

17 March 2006
Does anyone know if there is a box to check on ProSeries to force the correct mileage deduction when the vehicle is considered fully depreciated using standard mileage rates?

JR1 (talk|edits) said:

17 March 2006
Good question, and related, why, when you dispose of it, doesn't ProSeries know how to compute the recapture amounts based on mileage taken?

Watching this for good answers...

Msmith7305 (talk|edits) said:

18 March 2006
My understanding is that, unlike in the past, a vehicle which has been using the standard mileage rate is never considered to be fully depreciated. If I remember correctly, years ago that happened at 60,000 business miles. Not anymore. Therefore no need for a "checkbox".

Dennis (talk|edits) said:

18 March 2006
Really? Then why is there a depreciation component -- currently 17 cents? Any citation I can look at?

Skhyatt (talk|edits) said:

18 March 2006
I believe you are correct Dennis. The 17 cents is in there to figure the depreciated amount when needed.

Taxref (talk|edits) said:

18 March 2006
Msmith7305 is correct. Years ago one had to keep a running total of business miles in order to determine the depreciation component maximum, not any more.

Dennis (talk|edits) said:

18 March 2006
Personally I'd rather be wrong on this. I think the regs are pretty clear about reporting gain or loss using the depreciation component Treasury Regulations, Subchapter A, Sec. 1.1245-1

I've also seen cites that use the phrase "but not below zero". If this perhaps means that you can keep taking it with no effect on basis I'm game. I'd just like to see something specific.

Dennis (talk|edits) said:

19 March 2006
I'm old enough to remember the 60,000 miles and I was pretty sure the depreciation component replaced it.

What does reduce basis but not below zero mean?

Dennis (talk|edits) said:

19 March 2006
Lots of looks, but nobody knows?
 Research so far:  One opinion in a tax letter of unknown provenance that says the standard rate goes on forever.
 Citations including the phrase "but not below zero" refer specifically to basis adjustments under 1016.
 Nothing that definitively says standard rate reduced when vehicle is fully depreciated.  

In other cases, for example Section 179 limitations, "but not below zero" simply means has no further effect...but that's not really the same situation.

Skhyatt (talk|edits) said:

19 March 2006
found this in CCH 1040 Express Answers, page 8-4. "The standard mileage rate covers depreciation at 17 cents per mile. This portion of the deduction reduces the taxpayer's basis in the vehicle, but not below zero. Once the vehicle is fully depreciated, if the standard mileage method is continued, the full rate may still be taken, but none of it is considered depreciation."

Dennis (talk|edits) said:

20 March 2006
Sounds good to me.

Skhyatt (talk|edits) said:

20 March 2006
The information I found in the CCH book quoted above did not mention a code section or anything else. Would like to find something to back that, but unable to so far.

Dennis (talk|edits) said:

20 March 2006
Yo! JR1. Additional confirmation. ProSeries does indeed keep running depreciation on standard mileage rate and even got the disposition right. I assume you have to adjust cost every year based on cumulative mileage ratio.

JR1 (talk|edits) said:

20 March 2006
Cool. I've not noticed that before. will be watching for my next sale...I don't have a lot of cars using mileage only...

LJACPA (talk|edits) said:

30 August 2007
Old discussion, new question. Am I correct that an employer cannot use SMR to deduct auto expenses? I assume if so that this means that a 100% owned S corporation owning a vehicle must figure deduction using actual expenses. I wonder why this is?

BethAZ (talk|edits) said:

30 August 2007
Can the employer use the SMR to reimburse the employee?

LJACPA (talk|edits) said:

30 August 2007
I believe the answer to this is yes, because the vehicle is owned by the employee and not the employer.

Doormat (talk|edits) said:

4 February 2011
Taxpayer has taken standard mileage rate on vehicle and there is zero basis left. Going forward do I have to reduce the standard mileage rate for the depreciation component? Anyone have a specfic code reference that require this reduction?

Death&Taxes (talk|edits) said:

4 February 2011
Revenue Procedure 2010-51 gives a complete explanation under which code sections and regulations cover the standard mileage rate. Here are some helpful quotes:

"Under § 1016, a taxpayer must reduce the basis of an automobile used in business by the amount of depreciation the taxpayer claims for the automobile. If a taxpayer uses the business standard mileage rate to compute the expense of operating an automobile for any year, a per-mile amount (published in an annual notice) is treated as depreciation for those years in which the taxpayer used the business standard mileage rate."

The answer is that you do not reduce the standard mileage rate when the auto is fully depreciated. Years ago, the rate dropped after so many cumulative miles (60,000??) but that is no longer the case.

Dennis (talk|edits) said:

4 February 2011
Publication 463

"If your basis is reduced to zero (but not below zero) through the use of the standard mileage rate, and you continue to use your car for business, no adjustment (reduction) to the standard mileage rate is necessary.""

Under ACRS the standard mileage rate was reduced to 11 cents per mile after 15,000 miles each year -- vehicle was considered fully depreciated after 60,000 and 11 cents was all you could take.

The longer you practice the more obsolete code sections you cannot help but remember. Did you know that once upon a time there was a form to limit the tax on earned income to 50%?...♫

Death&Taxes (talk|edits) said:

4 February 2011
I would have quoted 463 but he wanted Code!

the Maximum Tax, Dennis.....and on audits of Schedule C businesses, the arguments would be over whether inventory was capital and put part of the profit above 50%. The form was in the 4000 series.

Dennis (talk|edits) said:

4 February 2011
The Tax Reform Act of 1969 also gave us the minimum tax and even then they found 112 individuals with incomes over $200,000 who paid no tax...Big scandal...♫ Note that Reg. 1.1348-2 is still there.

Doormat (talk|edits) said:

4 February 2011
Thank you ~ I appreciate you taking the time to respond!

Death&Taxes (talk|edits) said:

4 February 2011
btw, this Rev Proc seems to be published every year under a new number, and it seems to announce the new mileage rate for the coming year.

MWPXYZ (talk|edits) said:

4 February 2011
I feel young, I remember when the Zero Bracket Amount was the new and simpler way to go.

I don't remember what I had for supper last night, in fact . . .

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