Remember the good old days (a few weeks ago in 2017)?
That was when you could use tax code Section 1031 to avoid paying taxes when you traded in a business vehicle for a replacement vehicle. (In 2017 it was the same story for an exchange of other personal property like equipment, collectibles and more.)
Well, tax reform is here and it has killed the Section 1031 tax-deferred exchange (except for real property). Which means trading in your business vehicle in 2018 is now a taxable event.
However… this doesn’t mean that you’re necessarily going to pay more taxes. There are some silver linings to this dark IRS cloud which can help you as you’ll discover when you read my new article titled Tax Tips: Tax Reform Eliminates Tax Benefits of Business Vehicle Trade-Ins!
Three silver linings you should know about now:
Silver lining #1: Creating cash. If you pay self-employment taxes you likely should not have been trading vehicles in the first place. Instead, you should have been using the “sell-and-buy” strategy. Now, that’s what the law requires as we explain when you read the full article.
Silver lining #2: Finding tax losses. Do you file your business income and deductions on Schedule C of your Form 1040? If so, you are considered self-employed and therefore eligible to use the IRS mileage rates which (possible to your amazement) can create deductible tax losses when you trade vehicles in 2018. You’ll get the whole “tax loss possibility” story when you read the full article.
Silver lining #3: Spending less for vehicles. If you’re one of those folks who traded in vehicles to avoid taxes on gains, consider trading less. You see, you’ll save money because vehicles generally go down in value. With fewer vehicle purchases, you keep more money. We’ll give you all the details when you read the full article.