Sec 179 Depreciation Recapture

[rpedinoff]

In 2024 we put a vehicle into service for my spouse's business.  It is used only over the summer for business purposes but in year one it was used so much it was over the 50% Sec 179 threshold so we took accelerated depreciation.

Fast forward to 2025 and unfortunately business use has dropped to 40%.  Even though I'm not selling the vehicle and we plan to continue to use it for business use through its depreciable life, the new tax laws under OBBBA require me to take 179 depreciation recapture on my 2025 return

I've read some things about needing to use form 4797 for sale of an asset even though I haven't sold the vehicle, but not sure if it is automatically calculating the recapture for me or if there is something missing.  Turbotax did acknowledge that there was recapture going on as there were a number of errors that popped in the federal error check.  It's not jumping out in my depreciation forms and if I do the math it's just taking the original cost of the vehicle * business use % * 20% for a 5 year useful life.  This takes care of ongoing depreciation, but not recapture.

Where am I supposed to go to take care of the recapture income?  I can easily do the math on what I would have taken on a 5 year straight line basis versus the accelerated depreciation I took in year 1?  Can always just drop that in as "other income"

(Don't worry - I'm already lowering my head in shame for being greedy and taking 179 in year 1 when there was no guarantee I could hold it).

[AmyC]

I applaud your optimism and research. While you expected great things in 2024, filing the 4797 Part IV for the recapture is necessary in 2025.

When you entered the lower business use percentage, that should have triggered the interview to recapture.

It could be done already since the program knew there were issues. The recapture amount = sec 179 taken -allowable MACRS deduction. Remember to increase the adjusted basis of the vehicle this year so you don't lose that money. It sounds like you did.

Take a look and see if you have Form 4797 in your return and check Part IV.

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[rpedinoff]

Thank you.  It definitely wasn't calculating in the questionnaire the right way.  I'm not really sure how that happened as I believe I answered the questions correctly.  I deleted the vehicle from the prior year flow into the current year return and re-entered everything again and it seems to have worked.

I now have the "Enterable Form 4797" populated and I have manually dropped line 35 onto my schedule C as other income with a description of Sec 179 recapture.

What is interesting is that line 33 has what I took as a deduction in '24, and line 34 for recomputed depreciation is asking for straight line (half year convention) for both '24 and '25.  It then calculates the recapture versus what I would have taken straight line for 2 years.  Although the software is changing depreciation to S/L-HY on form 4562, it is still allowing a depreciation deduction for 2025.  As I do the math, that has already been calculated in coming up with the recapture and I need to change that to zero so I'm not double dipping, correct?

[rpedinoff]

forget what I said...I think I'm only supposed to put the '24 depreciation I was supposed to take on line 34 and then let the s/l flow in the regular calculation