Is money from the sale of an asset considered income?

Question

Is money from the sale of an asset, like a pickup truck, considered income? For example, let's say I am a carpenter and I buy a new pickup truck for $40,000. I deduct $18,000 in depreciation for the first tax year, then $16,000 for the second tax year, then $6,000 for the third tax year. So, altogether I have written off the entire cost of the truck. Now, let's say at the end of the third year I sell the truck for $20,000. Is that $20,000 now considered income?
If I had depreciated only $15,000 of the value of the truck, then in that case would only the difference between the remaining value and the sale price be income?

JTP - Apologise to Monica · Accepted Answer

Yes. What you describe is similar to those who buy a rental property, take depreciation, and then sell it. (With no replacement 1030 exchange, etc).
As a consumer, I buy a car, and sell it for a lower price some years later. Not much different from selling my old stuff at a yard sale.
But when you, a business person, recoups money from an asset with a basis that's dropped to zero, the tax man has his hand out.

DwB · Answer

As with all tax information from the Internet,
you should verify this with your accountant and/or tax professional.
If you have neither,
call the IRS and ask;
they are not evil monsters.
The JTP answer is correct,
this has some (maybe) clarifications.
The short answer is: yes, it is taxable income.
Longer (slightly different from the JTP answer) answer is:
You received a tax discount for an asset (the vehicle) for three years.
You have declared that the asset has zero value (which seems appropriate).
Now, you sell the asset for $20,000.
It appears that the asset has non-zero value.
That implies that you received more tax discounts for the asset in question.
Instead of penalizing you for over depreciation of the asset,
the IRS has you declare the $20,000 as taxable income.
perhaps a better description
After depreciating the asset to zero dollars,
when you were able to sell it for $20,000 you
"recovered" some of the lost value of the asset.
That "recovered" sum is taxable income and not capital gain.

Johns Tyler · Answer

As any other transactions that can earn you dollars, the sale of an asset also is considered as an income for you. Hence it is considered as an income, you have to pay a particular tax for it. In other terms this is also known as capital gain.
Now while you sell your depreciated pickup truck, by using the section 179 deduction, the entire selling price of $20000 can be considered as a taxable income.

Is money from the sale of an asset considered income?

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