Can I use straight line depreciation for a car?

[AK_Erik]

I started with straight line depreciation as I had less than 50% business use.  My understanding is I now have to stay with straight line depreciation.  But, I don't see how that is done.  I'm using Home & Business version.

[ReneeM7122]

Correct, if you started with SL depreciation, you have to keep it.

To enter an asset using straight-line depreciation, use these steps:

1. Navigate to the area of your tax return where you want to enter a depreciable asset
2. Click Add an Asset
3. On the screen titled Describe This Asset, choose Intangibles, Other property then click Continue
4. On the screen titled Tell Us a Little More, choose Other asset type then click Continue
5. On the next screen, enter the details for the description, cost, and date purchased or acquired then click Continue
6. On the next screen, continue adding details regarding the asset and click Continue
7. Choose the appropriate asset class (class life) and click Continue
8. Depending on the date the asset was placed in service, there may be an additional screen asking for more information
9. Next, choose the Straight Line depreciation method, then click Continue

Straight-line is a depreciation method that gives you the same deduction, year after year, over the asset's useful life. The deduction amount is simply the asset's cost basis divided by its years of useful life. On a graph, the asset's value over time would appear as a straight line sloping downward, hence the name.

In contrast, the default MACRS depreciation method gives you a bigger tax deduction in the early years, while the asset is still new, and a smaller deduction towards the end of the asset's useful life.

Because most business property is depreciated with MACRS, that's the method that TurboTax applies by default. However, you can apply straight line depreciation if you want. In fact, straight-line is the only option available for intangible assets, which can't use MACRS nor Section 179.

If you opt for straight line depreciation:

• It must be applied to all your assets in the same class.
• You must continue to use straight line depreciation for the life of the asset; you can't switch to MACRS in the future.

Caution: Switching to straight line depreciation requires a comprehensive knowledge of depreciation methods, asset classes, and recovery periods. Even tax experts can get confused. For this reason, we advise against switching unless you are absolutely sure you know what you're doing.

Related Information:

• What is MACRS and MACRS convention?
• What is a Section 179 deduction?
• What is depreciation?

[AK_Erik]

OK, that worked - although the turbotax prompts are confusing.

When I added a business asset the prompt specifically stated it was not for a vehicle: "Did you buy, or do you already own, any depreciable assets related to this business (other than vehicles)?"

I added it anyway and it appears to have worked correctly.

Thanks

[DianeW777]

The reason for the statement 'other than vehicles' is because there is a specific location for vehicles that are used in business activities. It may be easier with limitation requirements to enter it in the vehicle section, even though it is not wrong to enter it under business assets as long as you are keeping the other expenses limited to the business use percentage.  Please review the information below for assistance.

If you are using TurboTax CD/Download version you will find this under Business Expenses > Cars, trucks, and other vehicle expenses

• TurboTax will use the correct depreciation method based on the business use percentage as determined by your mileage record and entry.

You will be asked about the details of the vehicle such as make and model, weight class and date you began using it in business. Also the business miles and total miles for the year will be asked.  Once this is completed TurboTax will ask if you want to use actual expenses or the standard mileage rate.

NOTE: As indicated by @ReneeM7122 if you started using actual expenses on this vehicle the first year it was used for business then you must continue doing that.  The standard mileage rate must be selected the first year or you cannot use it on this vehicle in any year.

• If you choose the standard mileage rate the first year a vehicle is placed in service for business, you can choose actual expenses or the standard mileage rate in future years.
• The straight line depreciation must be used whenever actual expenses are used in this case.  See IRS Topic 510

[AK_Erik]

To clarify, I first tried to enter this information in the vehicle expenses section.  There was no option to select straight line depreciation there.  (Note: for the current tax year I have more than 50% business use and for the first year I had more than 50% business use - but I'm stuck with straight-line due to my business use falling below 50% in between)

[DaveF1006]

just so i can work out a scenario in my test software, how much straight-line depreciation have you already depreciated and what was your percentage of business use previously?

[d-jones77]

I am using the 2021 TurboTax Business desktop version. Everytime I follow these directions to do straight-line depreciation, it says that 2021 depreciation is $0.  Shouldn't the depreciation be the same for all years? I started using the car for business in Feb. 2021 and used it as 63.1% business use.

Additionally, when I edit the asset once I have selected straight-line depreciation, it still says $0 2021 depreciation even with MACRS. I have to create a whole new asset in order for it to recalculate and bring me the correct MACRS depreciation. This seems to be a bug in the system.

I want to use straight-line depreciation so that I may take the standard milage deduction. 

Please help me solve this, or give me a phone number I can call.

[JamesG1]

Vehicle expenses may be taken:

• As a standard mileage rate, or
• As actual expenses which includes a depreciation component.

You are not able to claim both.

There are two ways to deduct your business-related vehicle costs: Actual expenses or the standard mileage deduction.  You select which method you want to use at the screen Do you want to take the standard mileage deduction for this vehicle?

Most people use the standard mileage method because it simplifies your recordkeeping. There's no need to keep gas receipts, repair bills, etc. Instead, you total your business miles for the year and apply the IRS mileage rate.

The actual expenses method requires you to add up all the money actually spent in the operation of your vehicle. TurboTax will take your total vehicle expenses and multiply them by the percentage of the vehicle’s business use to get the amount of your deduction.

Some of the costs you can include in your Actual Expenses are:

• Lease payments
• Auto insurance
• Gasoline
• Maintenance (such as oil changes, brake pad replacements, tire rotations)
• New tire purchases
• Title, licensing, and registration fees (not deductible in all states; we will check to see if this expense is deductible in your state)
• Vehicle depreciation

[d-jones77]

James,

Thank you for your response. I am still confused, though, because of this explanation:

To take the standard mileage deduction for business, you can't: 

• Operate more than five or more vehicles at the same time, as in a fleet operation
• Claim a depreciation deduction on the car (other than the straight-line method)
• Claim a Section 179 deduction on the car
• Claim a special depreciation allowance on the car
• Have claimed actual expenses after 1997 for a leased car"

Source: https://ttlc.intuit.com/community/credits-and-deductions/help/what-are-the-standard-mileage-rates/00...

The phrasing that I can't take the standard milage deduction along with depreciating my car other than the straight-line method seems to contradict what you just told me.

Am I missing something?

Thanks!

[JulieS]

Yes, you are missing the details of using the standard mileage deduction.

You can never take the standard mileage deduction and depreciation of any kind in the same year, on the same vehicle.

To use the standard mileage deduction, you must elect to use it the first year the vehicle is used for business. After that you can switch from the standard mileage rate to the actual expenses method.

If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation.