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wdyuen
Level 2

Deducting/Depreciating car on Form 4562

  1.  I share the ownership of the rental property with my dad and my aunt.  We all have active participation in the rental property and we're all under a Partnership status. My dad had purchased a new car to use for the business (~54% of the time, calculated from logged miles traveled in 2019). It is my understanding that since that car does not have mine or my aunt’s name on it that only my dad can claim the depreciation and deduction for the car.  Is my understanding correct?    
  2.  The car that my dad bought has 3 co-owners.  One is my dad, the others are his wife and his stepson.  Only my dad is involved in the rental property.  Both his wife and his stepson are not involved in the rental property.  Since this is the case and my dad isn’t the sole owner of the car, can he still deduct and depreciate the car on Form 4562? 
  3.  If yes, and we’re using actual expenses to calculate depreciation, would he be deducting 100% of the actual expenses, or would he only be allowed to deduct 33% (equivalent to him technically owning 1/3 of the car)?

Thanks in advance for the help!

7 Replies
AmeliesUncle
Level 12

Deducting/Depreciating car on Form 4562


@wdyuen wrote:
  1. we're all under a Partnership status.

Are you saying you are filing a Partnership return for the rental (Form 1065)?  Or are you each reporting your share of the rental on your personal tax return as a rental property on page 1 of Schedule E?

 

 

wdyuen
Level 2

Deducting/Depreciating car on Form 4562

The latter, with Schedule E

AmeliesUncle
Level 12

Deducting/Depreciating car on Form 4562


@wdyuen wrote:
  1.  I share the ownership of the rental property with my dad and my aunt.  We all have active participation in the rental property and we're all under a Partnership status. My dad had purchased a new car to use for the business (~54% of the time, calculated from logged miles traveled in 2019). It is my understanding that since that car does not have mine or my aunt’s name on it that only my dad can claim the depreciation and deduction for the car.  Is my understanding correct?    
  2.  The car that my dad bought has 3 co-owners.  One is my dad, the others are his wife and his stepson.  Only my dad is involved in the rental property.  Both his wife and his stepson are not involved in the rental property.  Since this is the case and my dad isn’t the sole owner of the car, can he still deduct and depreciate the car on Form 4562? 
  3.  If yes, and we’re using actual expenses to calculate depreciation, would he be deducting 100% of the actual expenses, or would he only be allowed to deduct 33% (equivalent to him technically owning 1/3 of the car)?

Thanks in advance for the help!


1) Yes.  Your dad is the only one that incurred that expense.

2) Yes, he can claim all valid vehicle expenses he incurs.

3) He probably can claim 100%.  Assuming he files a Joint tax return, his wife is part of the deal.  As for the stepson, in most cases that is fine.  In the event his stepson paid for his 1/3 of the vehicle, then it could be a gray area and could depend on state law.  But for the most part, your father can probably claim it all.

wdyuen
Level 2

Deducting/Depreciating car on Form 4562

Thanks for your answer!  I'm curious as to why Turbotax is deducting the car via Part V Listed Property as opposed to Part I Section 179.  Based on what I've read online, it looks like both Section 179 and Listed Property deductions can be applied to my situation (i.e. car used >50% for business).

DavidS127
Expert Alumni

Deducting/Depreciating car on Form 4562

Listed property is "listed" because of the types of property involved, e.g., vehicles used for transportation and other property used for entertainment or recreation.  See the section of the IRS instructions for Form 4562 at this link.  Listed property used more than 50% in the business is eligible for the Section 179 deduction.

 

Line 26 in Part V of Form 4562 will show the "elected section 179 cost" for listed property.

 

 

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wdyuen
Level 2

Deducting/Depreciating car on Form 4562

Thanks for your answer!

  1. So on Form 4562, if I elect to take the car depreciation as a Section 179 deduction,  I see that I can no longer take the Special depreciation allowance (Line 25).  Instead, I would have to use the depreciation method on Lines 26 (e) - (h), and then take the amount on Line 26 (h) into Line 26 (i) as a Section 179.  Then, I'd report that number into Part I Line 7.  Am I doing this correctly?
  2. The instructions for Form 4562 says that I can take Part II Special Depreciation Allowance only if it's a "tangible property depreciated under MACRS with a recovery period of 20 years or less." I think the MACRS depreciation for a car is 5 years recovery period, right? So,if I were to take Section 179 deduction for the car, would the car still qualify for special depreciation? If yes, would special depreciation only be for tax year 2019?
  3. The car was used >50% in activities for the rental property (co-owned by people in a Partnership) . Would the section 179 (only applied to the business usage portion of the car) extend to the partnership or only my dad?
AmeliesUncle
Level 12

Deducting/Depreciating car on Form 4562

It seems like you are manually filling out the forms.  Depreciation is complex, and I really suggest that you use tax software.

 

Don't use Section 179, use Special depreciation.

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