Standard mileage vs. actual auto expenses (correction)

[11Buster]

Does anyone know what is meant by IRS Pub 463 stating, in essence, one can continue to use standard mileage rate on a vehicle that is fully depreciated (after having using standard method in the first year and thus being allowed to switch back and forth between actual and standard in future years AND not having to reduce basis (below $0) by the depreciation component of the standard rate (post depreciation period) , when asset sold?

[qbteachmt]

When using the mileage rate, even if the depreciation component would result in the vehicle basis being below $0, you don't reduce the mileage rate for that depreciation component.

Real world: you're allowed to drive an old car forever and keep taking the full mileage rate every year.

You also could have edited your prior posting or simply updated it with the text here. I will flag the original as a duplicate.

[TaxGuyBill]

Maybe an example will help it make sense.

The Standard Mileage Rate includes some built-in depreciation.  The amount changes for each year, but for 2024 that built-in depreciation is 30 cents per mile.

Let's say a taxpayer buys a car for $50,000 and drives 100,000 miles in 2024.  The built-in depreciation is $30,000.  That means the Adjusted Basis is $20,000 and that amount is used to determine if it is sold at a gain or a loss.

Now let's say the car only cost $20,000 and drives 100,000 miles in 2024.  The built-in depreciation is $30,000.  However, the Basis can't go below zero so the Adjusted Basis is $0 and that is what is used to determine if it is sold at a gain or a loss (you essentially got $10,000 of depreciation for free).  It is saying you can continue to use the Standard Mileage Rate even though the built-in depreciation has already lowered the Adjusted Basis to $0.

Does that help at all?

[11Buster]

Yes, I have read some of the examples on line from different posts similar to yours.  I understand all of this, however I think our issue is the doesn't seem like the IRS would give you a freebie (as one writer put it) on getting the benefit of the depreciation factor of the standard amount (even after the vehicle is fully depreciated), without having to reduce the $0 basis even further (below $0 in this case) recapturing the amount.  Seems like double-dipping on the same vehicle.  Make sense?  Thanks!

[TaxGuyBill]

That is why that Publication is making a specific point about that:  It is usual compared to most other things.

But that is how it works.

[BobKamman]

Some of us are old enough to remember when there was a separate rate to use once the vehicle was fully depreciated.  Was it maybe 20 years ago that IRS decided to show it can be friendly and simplify things, when it was difficult to enforce the rule anyway?