Section 179 recapture calculation

Forum|Forum|3 years ago
March 8, 2023
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Hello,

My wife purchased a laptop for business use and put it into service in December 2021. We took a section 179 deduction on our 2021 taxes for the full purchase price of $3,000. In January 2022, she decided to stop operating the business, and we converted the laptop from 100% business use to 100% personal use. She has no other business assets. I understand that we need to recapture a portion of the $3k deduction on our 2022 taxes.

I'm struggling with how to calculate the "used up" portion of the depreciation, however. Is the correct percentage equal to 3 months (1.5 months for mid-quarter convention * 2 quarters) out of the 5 year useful life? i.e. the "used up" depreciation amount would be $3,000 * 3 / (5 * 12) = $150. So we'd then need to recapture $3,000-$150 = $2,850?

Thank you in advance

Cynthiad66

Your recapture appears reasonable based on the amount of use. I performed a calculation that was very close to yours. IRS should be fine with the amount of the recapture since any difference would be considered deminimis.

A section 179 recapture occurs when you add income back to the section 179 deduction you took in a previous year. If you claim a section 179 deduction for the cost of property—and in some year after you place the property in service you do not use it primarily for business—you may have to recapture part of the deduction you took. This can happen in any tax year during the recovery period for the property.

To calculate the recapture amount, subtract the depreciation that would have been allowable on the section 179 for prior tax years and the tax year of recapture from the section 179 deduction claimed.

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