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Pasha87
Level 2

Any recapture of standard mileage deduction for personal car used less than 20% for a business now closed?

I occasionally (less than 20%) used my personal vehicle (purchased in 2005) for my very small business and only ever took the standard mileage deduction.  I closed my business at the end of 2019 so the car will now be for personal use only.  I am using TurboTax Deluxe.  On the Vehicle Summary section, I reported when I stopped using the vehicle for business and indicated it was converted to nonbusiness use.  I was then directed to go to "Sale of Business Property" to enter recapture information, but when I answered "No" to the question "Did business usage...of property fall to 50% of less for the first time in 2019", the screen returned to the "Your 2019 Income Summary" page.   Am I correct in assuming that nothing more needs to be done with regards to this vehicle or am I missing something here?  

2 Replies
soultax09
Level 5

Any recapture of standard mileage deduction for personal car used less than 20% for a business now closed?

You don't recapture depreciation when using standard mileage because the purpose of recapture is to account for excess depreciation. If you use standard mileage there is depreciation included but only precise amount of depreciation that would be taken if exact expenses were deducted.

Carl
Level 15

Any recapture of standard mileage deduction for personal car used less than 20% for a business now closed?

You don't recapture depreciation when using standard mileage because the purpose of recapture is to account for excess depreciation.

I'm not clear what you're trying to say with the above. It just doesn't make sense to me.

@Pasha87 basically, you have to recapture all depreciation taken on the vehicle in the tax year you dispose of the vehicle. Either when you sell it, trade it in, donate it, or dispose of it in some other way such as junking it.  Since you converted the vehicle to personal use in 2019 and did not "dispose" of it, you're basically done. But if in 2020 (as an example) if you trade it in for a new vehicle, you'll need to report that on your 2020 tax return. Basically, you'll be reporting that you "sold" the vehicle for whatever the trade-in value is.

One thing you will need to know for that, is the amount of depreciation taken on the vehicle. Since the vehicle was not 100% business use, that tells me you to the "per mile" deduction. As you know, the amount for that changes each year. Included in that per-mile deduction is depreciation; which also changes each year.

So to get the amount of depreciation you'll need to "recapture" when you dispose of the vehicle, look back in your mileage records and get the number of business miles you claimed for each year you used the vehicle for business.  Then using the chart at https://www.smbiz.com/sbrl003.html#dsm do the math to figure the total depreciation you took on the vehicle while you owned it. Then keep that figure in a safe place so you'll have it for reporting purposes in the future.

Finally, note that even though you are required to "report" the depreciation recapture in the tax year you dispose of the car, I seriously doubt it will have any impact on your taxes. That's becuase even after recapturing that depreciation, what you get for the car when you dispose of it will be so low, it will negate the taxability of that recaptured depreciation anyway. But the important thing is, that you follow tax law and report it as required.

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