Tax Year Prior to 2020: Do I report section 179 expense recapture if i have $0 income?

[cl4]

I have a personal photography business for which I've taken section 179 expense in prior years for camera & computer equipment, but my business is temporarily on hold as I don't have time to run it right now.  Do I just report 0 income and 0 expense for this business or do i need to do a section 179 expense recapture?  I haven't sold any of the assets.  They just aren't being used at all.

[gina1]

Hi, just wondering what you ended up doing. I'm in that situation now. Nothing is "personal use", it's just in storage, and I've got a zero/zero situation. I'm unsure how to classify the assets unless I actually sell them. (Mine are PA and music broadcasting equip.)

[KarenL2]

No, you don't need to do a Section 179 recapture since you are not out of business.  Just report zero income and zero expenses for this year.   If you don't continue the business for awhile, then you may need to dispose of the assets (take them out of service) and recapture the depreciation at that point.  The IRS will typically like to see a profit in 3 of the previous 5 years when you have a business.  That said, there are circumstances that prevent that from happening.  Just be aware..

[jonate24]

I had same question.  The answer provided above finally cleared it up for me on the Section 179 recapture. But is a Schedule C required, even though no income or expenses for the year and there are assets still attached to the Section 179 deduction?

[Cattlerancher]

If you are depreciating assets in your business, a schedule C is required, even with no income. If you dispose of the assets from your business by converting them to personal use, only partial depreciation recapture is owed on assets that took accelerated depreciation. Assets depreciated over their normal useful life would not have depreciation recaptured until they are sold or otherwise disposed of.

[gina1]

If the assets are past their depreciated life does it matter how they are disposed of to get them off the schedule and do a final Schedule C? I think most of my equipment will be in storage for the foreseeable future unless I do get some jobs again. I don't have plans to sell it, and, since I'm not a corp I know I don't have to buy them from myself. Would I need to use "personal use" even if I'm not using them at all?

[Cattlerancher]

Converting your assets to Personal Use just removes them from your business so you can close down your schedule C or F business. You do not pay depreciation recapture on a depreciated asset until it's sold. When reporting how you are disposing of your asset, TurboTax will calculate any early sec 179 recapture, if any is owed. So keep good records for when/if you do sell them.

From TurboTax;
Converting Assets to Personal Use

When you convert an asset to personal use, there is no gain to report. However, you must report any section 179 recapture this year.

A section 179 deduction is subject to recapture if you converted the asset to personal use before the end of its depreciable life. Learn More

If you sell the asset in the future, you must still report it as the sale of a business asset even though you are now using it for personal purposes. Therefore, you must keep all records of your business use of the asset, and of the amount of depreciation claimed.

If during the time you used the asset for business your percentage of business use was less than 100%, you will have two sales to report. You must report the sale of the business portion of the asset and the sale of the personal portion of the asset separately.

[gina1]

Thank you. I've been using Premier, which doesn't calculate anything (gives the impression it does, but doesn't). So the home & biz version will calculate the recapture? That would be helpful. Once the final Schedule C is filed, the asset part gets deleted, correct? Thank you so much for your replies.

[Cattlerancher]

You must be using the desktop version of Premier because Self Employment is not supported in the online version of Premier. During the disposal interview, TurboTax will ask if any sec 179 was taken, that's when it calculates any early recapture. All the desktop versions and the online Self Employed version will calculate the recapture. While entering your income and expense in your ____ schedule C (I hate to say final, you may be back in business next year!) you need to report "the disposal of your assets". To do that, find your business Asset Summary, click "Edit" on each asset in your business. Follow the interview. That's when they are removed from your Depreciation Report/Schedule form 4562, not simply filing a (final) schedule C.

[gina1]

Thank you for the info. Yes, it's the desktop Premier. It lets me do Schedule C and keep carrying the assets forward. If I dispose of anything, though, I have to calculate the MACRS myself and enter the recapture on form 4562 and then in Other Income manually. If I have no income next year I'll upgrade to a business version to take care of any recapture. Do you know if all the versions for personal and business do this? I couldn't find asset recapture listed on any of the options on the Quicken site, I guess it's a small enough thing that it's not mentioned. If I need to dispose of the assets at that point, do I convert them to "personal use" even if they aren't being used?

[Cattlerancher]

To quote you; "If I dispose of anything, though, I have to calculate the MACRS myself and enter the recapture on form 4562 and then in Other Income manually."--------I am 99.9% sure this is wrong. Your Premier desktop version calculates recapture and enters it on the correct forms automatically when you "Edit the Asset"  to report the sale of the asset or convert to personal use. You do not need H&B to do that, I am 99.9% sure. If you convert it to personal use and years later sell the asset search in TurboTax for "Sale of Business Property", then click Jump to----- then click the top two boxes "Sales of Business Property" and "Recapture of previously taken sec 179".
You can/should convert business assets to personal use any time the business is inactive. You will not pay any recapture at that time unless you used accelerated depreciation, even then it may only be partial recapture.

[gina1]

Unfortunately, they are section 179 items :-(.  Premier seems to take me in circles unless I sell something, but even then I had to calculate MACRS and enter the item and amounts on a worksheet myself. That was a couple years ago. Before I found this question here, I asked this one: <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3815720-where-do-i-enter-section-179-depreciation-recapture-amount... person who answered seemed to be explaining how to do it in Turbotax Business. The Section 179 has been nothing but a pain in the butt!

[gina1]

Ok, I found where to enter it in Premier, but I would still have to do all the calcs. Federal Taxes>Business Items>Sales of business property. The "learn more" warns "amounts that flow to other forms are not included in the total 2016 amounts for certain business property..." Click thru and you can choose "a recapture from a previously taken 179". It asks if your biz use fell under 50%. (there is no list of the assets).

Click thru to 179 recapture. Two boxes: sec 179 taken when property was purchased and Depreciation that could've been taken through 2016. In the underlined help link: in the second box you must calculate the depreciation...using any allowable method, see IRS pub 946. If you have more than one sec 179 asset to recapture this year, prepare a statement showing your computations for each asset, and enter totals in the boxes on the screen. Then attach the statement to your return.

Then I guess you manually enter the recapture total on Schedule C Other Income. Not sure what you do with the individual asset. Does Home & Biz make this easy? It's definitely worth a $10 upgrade!!! Thank you again!

[gina1]

Ok, yikes. I bought the Home & Biz 2014, in poking around a bit, the instructions are identical. If schedule 179, go to Sale of Business Property. Figure out your recapture, Put in totals, attach list :-(. (This was the 2014 version)

[Cattlerancher]

I just did a test asset in the section we are talking about above, in your second paragraph. In my H&B it is just like your Premier. Using the "Sales of Business Property" it does not calculate and add the previously allowed sec 179 to the right forms automatically,----- like it does when you "Edit" an existing asset in your business Asset Summary. So an upgrade won't help you. But I understand what they're trying to say and it sounds complicated when it is really not so. Do you still have the assets in your business asset summary?