After buying a boat (for the business) for 5K, I want to sell it for 5K, but it depreciated for example by 1K it is worth 4k. Do I pay taxes on the 4K or the 1K?

[Anonymous_ · Accepted solution]

Your adjusted basis is $4k, which means you have $1k of Section 1245 gain, which is taxed at ordinary income tax rates.

[Hal_Al]

In Turbotax (TT), you enter the sale price of $5K and the cost basis of $5K.  You will then be asked if you claimed (or should have claimed) any depreciation. You enter $1K.  Based on those inputs, TT will enter the numbers, in the proper places, on the forms.

[mindbodyboat2]

Great, and after selling, what do you do with the 4k that was collected from the selling of the equipment/boat? How is it taxed? I understand now that the 1k from the gain is taxed but the rest becomes what?... 

[Anonymous_]

The $4k is not subject to taxation; it is your adjusted basis in the property (i.e, your adjusted cost).