I have depreciation recapture income. Am I able to reduce this pro-rata based on prior Sch A AGI 2% job expense limitation deductions?

[jenvandyne]

I had a truck used for more than 50% business and thus was taking depreciation deductions.  This year I stopped using it for business and have calculated the depreciation recapture income (no Sec 179 ever taken.)  My prior years' deductions were subject to the Schedule A 2% of AGI limitation so I never received the full benefit.  It would seem only right to be able to reduce this income in a similar fashion since I'm having to recapture it.  

[DS30 · Accepted solution]

It depends -

The amount subject to recapture at any disposition of property under Section 1245 or Section 1250 is defined as the lesser of the gain limitation or the "depreciation limitation" (reduced by the applicable percentage in the case of certain Section 1250 property), and the amount of gain recaptured and treated as ordinary income under those sections cannot exceed either the gain or depreciation limitations.

The Depreciation limitation would be determined by the amount of depreciation taken so if the amount of actual depreciation taken was less than the allowed depreciation calculated due to the 2% AGI limitation, then you will calculate the amount of the depreciation limitation for recapture based on the amount actually taken (if this amount was correctly calculated).

Also note that if you do not have a gain on the deemed sale of the asset, then you will not have to include any depreciation recapture.