How do I deal with conversion of a vehicle fully depreciated using special depreciation deduction in 2021 from business to personal use. I am not selling the vehicle.

[DFS1]

I purchased a small truck, 75% business use in 2021 and depreciated it fully in one year using the special depreciation option. I am converting it to 100% personal use.  Do I understand correctly that if/until I sell the truck no reporting is required.  We simply do not make any reference to it on our 2023 return?

[pk]

@DFS1 , as I understand what your are saying is that 

(a) on the business books the value ( book value ) of the vehicle is zero.

(b) If your business is  "self-employment ", sole proprietorship or a single member LLC, it is a dis-regarded entity for tax purposes. Thus it has no  separate existence ( for tax purposes ).    In such a case therefore ,  the basis of the  vehicle is zero .  So when you sell the vehicle,  your gain would be sales price LESS basis i.e. the full sales price is your taxable gain.

(c) And  yes for a dis-regarded entity, there is no reporting till you dispose off the asset-- that is when you have  recognize the gain and pay taxes on the gain .

Does this make sense ?

[AmeliesUncle]

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@DFS1 wrote:
I purchased a small truck, 75% business use in 2021 and depreciated it fully in one year using the special depreciation option. I am converting it to 100% personal use.  Do I understand correctly that if/until I sell the truck no reporting is required.  We simply do not make any reference to it on our 2023 return?

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No, it will be reported because there will be some "recapture".

While your comments are correct for most depreciated assets, vehicles are "Listed Property" and have special rules.

When your vehicle drops to 50% or less (including converting it to 100% personal use), you must "recapture" the depreciation in excess of Straight-Line depreciation (this is a different kind of "recapture" than the kind that happens when you sell it).

Here is a simplified example:  Let's say when you took the Special Depreciation Allowance in 2021 it was a $10,000 deduction.  Now let's say that IF you had used Straight Line depreciation (no Special Depreciation Allowance) your total depreciation that you could have taken would have only been a total $4000 from 2021 through 2023.  In that scenario, you would "recapture" $6000 and that will be added to your regular business income.

If I remember correctly, the vehicle section does not handle this (although I think you still need to say you converted it to personal use there).  I think it is handled in the "Sale of Business Property" section to enter the proper information on the bottom of page two of Form 4562, then I think you need to manually enter the recapture income on your business.

EDIT:  I see you previously asked about this and I had answered you there as well:

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/recapture-depreciation-on-t[prod...