The period starts on the original date the vehicle was placed in service. If an asset with a 5 year recovery period was placed in service on August 9, 2017, the recovery period would end August 9, 2022. If actual expenses are claimed on a business vehicle, the Section 179 deduction, MACRS, and the special depreciation allowance must be recaptured if, during the recovery period, the business use of the vehicle drops to 50% or less. The recaptured amount is the excess of Section 179, MACRS, and the special depreciation allowance claimed versus what would have been allowed had MACRS straight-line depreciation been claimed for every year.
If business use drops to 50% or less, you must:
- Discontinue using accelerated MACRS
- Begin using straight-line depreciation
- Compute excess depreciation for all prior years
- Recapture excess depreciation by reporting it as ordinary income
TurboTax will walk you through these steps when you indicate that the business usage has dropped below 50%.
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