Can I use straight line depreciation for a car?

Forum|Forum|5 years ago
March 3, 2021
1 reply
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I started with straight line depreciation as I had less than 50% business use. My understanding is I now have to stay with straight line depreciation. But, I don't see how that is done. I'm using Home & Business version.

ReneeM7122

Level 9

Correct, if you started with SL depreciation, you have to keep it.

To enter an asset using straight-line depreciation, use these steps:

Navigate to the area of your tax return where you want to enter a depreciable asset
Click Add an Asset
On the screen titled Describe This Asset, choose Intangibles, Other property then click Continue
On the screen titled Tell Us a Little More, choose Other asset type then click Continue
On the next screen, enter the details for the description, cost, and date purchased or acquired then click Continue
On the next screen, continue adding details regarding the asset and click Continue
Choose the appropriate asset class (class life) and click Continue
Depending on the date the asset was placed in service, there may be an additional screen asking for more information
Next, choose the Straight Line depreciation method, then click Continue

Straight-line is a depreciation method that gives you the same deduction, year after year, over the asset's useful life. The deduction amount is simply the asset's cost basis divided by its years of useful life. On a graph, the asset's value over time would appear as a straight line sloping downward, hence the name.

In contrast, the default MACRS depreciation method gives you a bigger tax deduction in the early years, while the asset is still new, and a smaller deduction towards the end of the asset's useful life.

Because most business property is depreciated with MACRS, that's the method that TurboTax applies by default. However, you can apply straight line depreciation if you want. In fact, straight-line is the only option available for intangible assets, which can't use MACRS nor Section 179.

If you opt for straight line depreciation:

It must be applied to all your assets in the same class.
You must continue to use straight line depreciation for the life of the asset; you can't switch to MACRS in the future.

Caution: Switching to straight line depreciation requires a comprehensive knowledge of depreciation methods, asset classes, and recovery periods. Even tax experts can get confused. For this reason, we advise against switching unless you are absolutely sure you know what you're doing.

Related Information:

AK_ErikAuthor

Level 2

OK, that worked - although the turbotax prompts are confusing.

When I added a business asset the prompt specifically stated it was not for a vehicle: "Did you buy, or do you already own, any depreciable assets related to this business (other than vehicles)?"

I added it anyway and it appears to have worked correctly.

Thanks

DianeW777

Level 15

The reason for the statement 'other than vehicles' is because there is a specific location for vehicles that are used in business activities. It may be easier with limitation requirements to enter it in the vehicle section, even though it is not wrong to enter it under business assets as long as you are keeping the other expenses limited to the business use percentage. Please review the information below for assistance.

If you are using TurboTax CD/Download version you will find this under Business Expenses > Cars, trucks, and other vehicle expenses

TurboTax will use the correct depreciation method based on the business use percentage as determined by your mileage record and entry.

You will be asked about the details of the vehicle such as make and model, weight class and date you began using it in business. Also the business miles and total miles for the year will be asked. Once this is completed TurboTax will ask if you want to use actual expenses or the standard mileage rate.

NOTE: As indicated by @ReneeM7122 if you started using actual expenses on this vehicle the first year it was used for business then you must continue doing that. The standard mileage rate must be selected the first year or you cannot use it on this vehicle in any year.

If you choose the standard mileage rate the first year a vehicle is placed in service for business, you can choose actual expenses or the standard mileage rate in future years.
The straight line depreciation must be used whenever actual expenses are used in this case. See IRS Topic 510

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