Need help regarding car depreciation as sole proprietorship

[george0707]

Hi, I work primarily as W2 . This year I started taking 1099 side gig as sole proprietorship (NOT LLC). I have two cars under my name: a Toyota and a Volvo. The Volvo xc60 I bought in 2023 and have placed into 100% business use 2025.

My question:

1. For 2025 tax return, can I use bonus depreciation plus straight-line? I'm not sure as the year of purchase and placement in service are different
2. If in 2 years or so, I decide to transfer my Volvo to personal use, i.e., still under my name. I would be subject to recapture. Do I pay recapture when I make the transfer or when I sell the call, say like 10 years later?  I'm hoping to limit my recapture amount if IRS allows recapture at sale (lower faire market price after personal use)

Thanks

[RobertB4444]

1.  Since this is the year that the car goes into 100% service you may qualify for bonus depreciation this year.  You may not - it depends on the percentage of business use in prior years.  the system will let you know if you qualify.

2.  Depreciation recapture occurs at the point of sale.  When you convert the vehicle to personal use you need to maintain the records of the amount of depreciation taken up to that point.  Then, when you sell it, you will need to enter the amount of depreciation taken as well as the sales price in order to figure out the recapture amount.

@george0707 

[AmeliesUncle]

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@george0707 wrote:

f in 2 years or so, I decide to transfer my Volvo to personal use ... Do I pay recapture when I make the transfer

or when I sell the call, say like 10 years later?  

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Yes, there would be recapture when you convert it to personal use after 2 years.  The other answer did not take into account that a vehicle is "Listed Property".

You could also possibly have recapture when it is sold, if the business portion is sold at a gain.

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