Depreciation recapture

Forum|Forum|3 years ago
January 26, 2023
1 reply
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I closed my business (sole proprietorship) on 3/31/22. I took the section 179 depreciation ($11,656) for my 2019 vehicle used for business in the year I purchased the car (3/2019) and depreciated based on the calculation Turbo tax figured for both 2020 ($1037) and 2021($658) for a total depreciation of $13,351. How do I determine if I owe depreciation recapture? If I use straight line depreciation, the useful life is 5 years, but the car's resale value after only 5 years is much higher than salvage cost. Do I use the resale value to reduce the cost basis before I calculate the straight line depreciation for the 5 years?

Not A Product Question

AmeliesUncle

No, resale value and salvage cost has nothing to do it.

You need to calculate things using Straight Line, using the original Basis for depreciation.

kathyvAuthor

ok - so then the calculation would be as follows:

Cost basis $29,360 purchased 3/2019 - straight line depreciation would be $5872 per year for 5 years.

Through 2021 I've taken depreciation totaling $13,351. Using straight line calculation through 2021 depreciation would be $17,616 so no recapture due, correct?

AmeliesUncle

@kathyv wrot

Cost basis $29,360 purchased 3/2019 - straight line depreciation would be $5872 per year for 5 years.

Through 2021 I've taken depreciation totaling $13,351.

Using straight line calculation through 2021 depreciation would be $17,616 so no recapture due, correct?

Does the $13,351 include the $11,656?

Was it 100% business use? It not, that needs to be factored in. Based on your numbers, that does not seem to be the case.

The $17,616 would be assuming 100% business use. Is that the case?