AMT Depreciation and AMT Prior Depreciation

[ksbbdog]

TurboTax wants me to enter "AMT Prior Depreciation" for my vehicle and I'm very confused about what this unit should be. Is it asking me for:

1) the actual yearly straight-line depreciation deduction (basis x 0.20)

2) the basis value itself (maximum possible depreciation), or

3) the value minus straight-line depreciation (basis x 0.80)?

My example: I purchased a vehicle in 2022 for $12,900. It was valued at $11,500 when put into service. Should my AMT prior depreciation (or AMT depreciation) be:

1) 2,300

2) 11,500

3) 9,200

Or none of these? It's very confusing. I've read almost every other post on here about AMT depreciation and they are not clear or helpful at all.

[KrisD15]

To clarify, 

are you removing the vehicle from business service (sold or converted to personal use)? 

Unless you were ever subject to Alternative Minimum Tax (AMT) , and you would have known if you had been, the AMT depreciation is the same as regular depreciation. 

Are you putting into service for tax year 2023 a vehicle you purchased in 2022?

If you have never used this particular vehicle as a business asset/vehicle before placing it into service, you would have claimed no depreciation, so zero AMT Depreciation. If you used this vehicle previously as a business vehicle, enter the depreciation you have claimed on it previously. You can find that in the prior tax return for the year it was previously used as a business vehicle, look for Form 4562 "Depreciation and Amortization Report" for that prior year. 

$11,500 will be your BASIS (your cost or value when placed into service) on which depreciation is calculated. 

If a Taxpayer is over a certain income limit, they are subject to Alternative Minimum Tax (AMT) and they need to adjust certain deductions including the depreciation they can claim. 

HERE is more information about AMT 

[ksbbdog]

Hi, thanks --

No, I'm not removing it from service.

I claimed the vehicle last year on my returns and it didn't ask me for a depreciation number.

This year it's asking for both AMT prior (assuming that means 2022) and AMT depreciation. I have no idea why it's asking me for AMT, other than I'm using actual vehicle expenses this year (and did a standard deduction last year).

[ksbbdog]

There was no depreciation value on my return last year, I just checked.

So I'm assuming I need to calculate for last year and then also for this year, and I just don't understand how to do that.

[KrisD15]

Multiply the number of miles you claimed for all the years it was used as a business vehicle  (in your case only 2022) by the depreciation equivalent for that year (in your case .26) 

Enter that amount as both Prior Depreciation and also as Prior AMT Depreciation. 

Because you used the STANDARD MILEAGE RATE the first you you placed it into service in 2022, you reported miles driven and expensed the amount allowed per mile. Depreciation was not taken separately. You will not find a depreciation schedule for tax year 2022.

Now for 2023 you want to use the ACTUAL EXPENSES METHOD, so for tax year 2023, depreciation will be calculated and reported separately.

Depreciation is used because when you make a large business purchase, like a vehicle, you assume it will lose value over time, not just the first year. Depreciation subtracts a portion of value each year until the value goes down to zero. 

In order to subtract equal portions, the program needs to know what the value balance is. 

If you had been using the actual method, and you claimed 2,300 depreciation on a vehicle with a basis (value) of 11,500, the adjusted basis would be 9,200 (11,500 - 2,300)

BUT you used standard mileage. 

The Standard Mileage Rate has a "Depreciation Equivalent" built into it. For Tax Year 2022 every mile you claimed has .26 worth of depreciation equivalent. You must find the depreciation by multiplying the number of miles by the depreciation equivalent of that year.