Recapture Depreciation on Closed Business

Forum|Forum|2 years ago
March 4, 2024
2 replies
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I report my LLC on Sch C. I closed my business in 2023. As for the car i was claiming 60% as business use and I am not selling the car and it will be now 100% personal use. How do we treat this on my tax return, does the car stay on my return until it's disposed and then I recapture the depreciation or should we report as disposed using FMV and recapture the depreciation in 2023? Thanks for the help

DianeW777

No, you do not report it as being sold until it is actually sold or traded. At that time you will handle the depreciation recapture which will be a tax event unless it is junked. Be sure to keep a record of your vehicle information with your tax files until you no longer have it.

Use the information here in TurboTax to handle this conversion to personal use.

When you are in the vehicle information in your business be sure to select 'Sold, disposed of, etc....' then do not indicate it was sold. You must say 'Yes' it was converted to personal use. This will eliminate any sales information in the vehicle it self and will likely remove it from your return for next year. That's all right since you will have the records when and if you trade or sell it.

Note: A trade for the IRS is considered a sale at the trade-in value.

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AmeliesUncle

How were you depreciating the vehicle?

Standard Mileage Rate? Straight-Line depreciation? Accelerated depreciation (Bonus depreciation, Section 179 or 200%DB)?

That will determine if you need to do any recapture now or not.