Business Vehicle Basis for Depreciation

[kaijumoto]

I purchased a large van (over 6000lb) in June 2019 for $25,100 and used it for 84.75% business that year. For 2019 federal taxes, I chose the special depreciation allowance of 100%, which calculated to $21,272 based on business usage. Am I correct in my understanding that $21,272 is considered the vehicle cost basis going forward and that, in subsequent tax years, there would be no further depreciation deduction for this vehicle?

[tagteam]

Your adjusted basis is $0 for business purposes and there is no more cost recovery on this vehicle since you essentially expensed the entire percentage of business usage.

[kaijumoto]

Thank you! I determined that starting with my 2021 return (and affecting 2022), my Turbotax return started depreciating the difference between the original cost ($25100) and the 100% special depreciation ($21272) from 2019. I will have to check those returns to see if I owe $ after amending.

What is troubling me now is that in my 2023 return, I can't get past the Car & Truck Expenses Worksheet, Part VI (Vehicle Depreciation Information), box 36i. This box is "Special Depreciation Allowance" and since 2019, for this car, has always been $21,272, which was the 100% special depreciation allowance used in the 2019 return for this car. But when I put that value in now it says "Special Depreciation Allowance is too large. It cannot exceed 30% of eligible basis." 

I can get past this if I zero out 36i and put $21,272 in box 37 (Prior Depreciation), but that doesn't seem like the correct thing to do per the instructions. Or I could zero out the Vehicle Basis in 33c. 

Either way, the end result is the same -- no depreciation for this vehicle is applied to the return (which is what I want) and the calculated taxes are correct, but the means to get there (what is shown on Form 4562) doesn't look entirely correct. 

Is there a correct way to show the prior special depreciation allowance in 36i? Does this matter as long as the end result (calculated tax) is correct?

[AmeliesUncle]

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@kaijumoto wrote:

my Turbotax return started depreciating the difference between the original cost ($25100) and the 100% special depreciation ($21272) from 2019. 

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If your business percentage increased higher than 84.75%, you are able to depreciate some of the additional amount.

For the error message about the Special Depreciation Allowance, I'm wondering if you checked a wrong box or entered a wrong date somewhere (or accidently said it was under 6000 pounds).  In many cases entering the amount under "prior depreciation" would be fine, but you if something is mis-marked somewhere, it could slightly alter the results to give an incorrect amount.

[kaijumoto]

Ahh, ok, thank you - the business use was higher than 84.75% in 2021, 2022, and 2023 and I wasn't aware that would entitle me to additional deductions. 

The one thing I notice on the 2023 "Car and Truck Expenses Worksheet", Part VI (Vehicle Depreciation Information), Boxes 36a1 and 36a2 are marked "n/a", whereas in all previous years 36a1 is Yes, and 36a2 is No. This is how Turbotax imported it from my 2022 return and it does not give me the option to change it (nor does it ask me any questions in the walk-through guide about it. I tried removing the vehicle and creating a new vehicle and it still marks those boxes as "n/a".

Box 36a (Economic Stimulus - Qualified Property) is checked "Yes". If I deselect this (so neither Yes or No is selected), then I can put check marks in 36a1 and 36a2, but when I go back and choose "Yes" in 36a it flips 36a1 and 36a2 to N/A :(

Part 1 Box 2 (Date vehicle acquired) is 06/23/2019 and Box 3 (Date placed into service) is 07/02/2019. These are consistent with all past returns.

[kaijumoto]

I was able to resolve the issue of the "N/A" check in boxes 36a1 and 36a2. When I right-click on the "n/a", I can select "Override" and then I am able to select "Yes" for 36a1 (was property acquired after 9/27/17?) and "No" for 36a2 (elect 50% in place of 100% special depreciation allowance?). After doing this, box 36i Special Deprecation Allowance is now valid and everything checks out!