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Level 1

Depreciation causes loss

I have a 1099 for my truck rental.  i used it on my job.  due to covid i was laid off.  I depreciated my truck last year and this year i was supposed to take $17600 depreciation deduction.  my income was only $3900.  It is causing me to have a business loss of $13600 and it is taking it off my W2 wages.  Is there anyway to adjust this?  Im not doing this line of work anymore so not sure if i should just take the loss or how to handle this.  Thanks

3 Replies
Expert Alumni

Depreciation causes loss

If you are no longer Self-Employed, close the business as of the date you stopped. 


Taking the depreciation on this return will come back at you later. You will need to recapture the depreciation when you move the truck from business ownership to personal, or when you sell the truck. 


Depreciation lowers your taxable income when taken, and it increases taxable income when it is recaptured. Even the Standard Mileage rate has a depreciation portion that needs to be recaptured. If you are no longer renting the truck, and you don't plan to continue any time soon, close the business. 


TurboTax talks closing a business

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Level 1

Depreciation causes loss

Ok so if im understanding this correctly, converting a business asset in a sole proprietorship to personal use isn't a taxable event.  I put date disposed and that i converted it.  It is asking me for a sales price.  The original basis (purchase price was $55000-accumulated depreciation of $19,800) so i put sales price as 35200.  It shows no gain and no loss.  

Expert Alumni

Depreciation causes loss

Not exactly.  You do not recognize any gain or loss in the year of conversion. 


Disposed and converted are two very different events. 


Converted is from your business to you.  Disposed is from you to another party.


You do have to recognize the recapture of the depreciation when you dispose or sell the truck.  

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