Depreciation recapture is assessed when the sale price of an asset exceeds the tax basis or adjusted cost basis. The difference between these figures is thus "recaptured" by reporting it as ordinary income. Depreciation recapture is reported on Internal Revenue Service (IRS) Form 4797.
To account for the recapture, you should incorporate Form 4797, sale of business property to your return.
To add Form 4797:
- Search for 4797, sale of business property and click the Jump to link.
- On the Any Other Property Sales? screen, select the first checkbox and click Continue.
- Follow the instructions to complete the form.
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