Glazer Financial Network


Contact us for a complimentary consultation or call (972) 385-0007 or (800) 999-8931.
Tuesdays With Morey
Tax Blog
Financial Articles
Webinar Archive
P&C Blog

Case Study: Trade-In on a New SUV - Reimbursement by Corporation


When it comes to vehicles, there’s much to think about.

For example, the rules on vehicle trade-ins have totally changed.

To illustrate, let me tell you about a trade-in Joyce completed last month. She traded in her three-year-old vehicle on a new SUV with a gross vehicle weight rating (GVWR) of 6,075 pounds.

The dealer granted her a trade-in value of $13,000 and paid off the $16,000 remaining note on the old vehicle.

Under the tax law, after the Tax Cuts and Jobs Act, this is a sale of the old vehicle traded in and a purchase of the new SUV. So, we have two different transactions. In this story, I’m going to deal with only the trade-in.

Joyce used the vehicle that she traded in 70 percent for business, drove it 41,000 total miles, and used IRS mileage rates to calculate her business vehicle deductions. She paid $50,000 for the vehicle in 2018. Here’s how we calculated her tax-deductible loss:

Net purchase price (basis) $50,000
2018: 18,000 x 25 cents 4,500
2019: 16,000 x 26 cents 4,680
2020: 7,000 x 27 cents 1,890
Total depreciation 11,070
Adjusted basis 38,930
Trade-in (sale)  
Trade value 13,000
Pay off the loan 16,000
Total trade amount 29,000
Net loss on sale 9,930
Business percent 70%
Deductible loss $ 6,951

Calculation. Because we believe it is easier, we use 100 percent for the calculations and then use the 70 percent business percentage to find the final amount—the deductible loss, in this case.

Depreciation. Within the IRS standard mileage rate is a component for depreciation. For example, the 2020 standard mileage rate is 57.5 cents a mile, with 27 cents for depreciation incorporated in that rate.

Trade-in. The dealer allowed $13,000 as the fair market value of the trade. This operates as cash when Joyce makes her purchase of the new SUV. In addition, the dealer paid off the existing note, so the total value of the trade for gain and loss purposes is $29,000 ($13,000 + $16,000).

Deductible loss. The $6,951 loss is an ordinary loss that Joyce reports on IRS Form 4797.

The important part of Joyce’s story is that her trade-in, like all trade-ins of vehicles and other personal property, is a sale. And that means there’s a taxable gain or loss.

If you are thinking of trading in your vehicle or other personal property, make sure to consider the taxable gain or loss. If you would like my help, please contact us.

If you have any questions about whether or not this applies to you please email Morey at

LinkedIn YouTube Twitter

Securities offered through Kovack Securities, Inc. Member FINRA / SIPC.
6451 N. Federal Highway, Suite 1201, Ft. Lauderdale, FL 33308 (954) 782-4771.
Advisory Services offered through GFN Capital Management a Registered Investment Advisor.
GFN Capital Management and Glazer Capital Management are not affiliated
with Kovack Securities, Inc or Kovack Advisors, Inc.

Glazer Financial Network is located at 
13747 Montfort Drive, Suite 350 
Dallas, TX 75240

Copyright © 2017, Glazer Financial Network. All rights reserved.