I want to take Sec 179 Depreciation on my newly purchased 100% bs vehicle (Sch C) but am worried when I retire in 5 yrs from my business, will I have to pay recapture on the 179. It will be fully depreciated but I will continue to use for personal use. Should I take the 179 now or use Std Mileage. This is my first year of using the new truck.
What if I continue to use in my retirement from my business my vehicle for my personal use. Say after 5 years of fully depreciating my vehicle, it is now worth around $10,000. Will I have to pay recapture on the value of the vehicle to me even if I have fully depreciated it?
You must recapture depreciation for your vehicle, if you sell it before it's useful life is over. If you keep it for the useful life, then your Section 179 deduction is spread over the correct amount of time.
What if it is fully depreciated (5 years) but I continue to use it in retirement as a personal vehicle. Say it's still worth about $10,000. Do I pay recapture (business income) on the $10,000 AND on the amount of 179 depreciation which I would like to take this year? ($4,000)
No. You are done. You retired it from business use. There is no more depreciation. Again, you don;t have to recapture anything.
So I have a 2012 Dodge that I used Section 179 in 2012. Should I have to recapture the trade in value of $25,000? TurboTax is saying that. Didn't I qualify for the useful life of the auto? Or do you always have to recapture the business percentage of the trade in?
@Hank101 wrote:So I have a 2012 Dodge that I used Section 179 in 2012. Should I have to recapture the trade in value of $25,000? TurboTax is saying that. Didn't I qualify for the useful life of the auto? Or do you always have to recapture the business percentage of the trade in?
You are mixing up two different kinds of "recapture". In your case, it sounds like you are just subject to 'regular' recapture of depreciation because you sold the vehicle for more than it's Adjusted Basis. That has nothing to do with Section 179, other than that using Section 179 lowered your "Basis" by taking a lot of depreciation at once.
I think the original answer was wrong as well. I want to get another expert to review this whole thread.
@Hal_Al can you check the whole discussion?
Generally speaking, whenever you sell a business asset for more than its adjusted cost basis, you have a capital gain and depreciation recapture.
Depreciation recapture is not required, at the time, you take the vehicle out of service and convert it to personal use.
Depreciation recapture is required, when you sell the vehicle or trade it in, whether the sale occurs at the end of business use or later, after it has been used as a personal vehicle.
Most people have the mistaken belief that depreciation is a permanent deduction. It is not. When you sell or dispose any asset that you have taken depreciation on, you are required to recapture that depreciation in the year of disposition and pay taxes on it if applicable. There is only one scenario where depreciation is potentially not recaptured. That would be if the owner of the depreciated asset dies. But even then, that's now always the case.
@Opus 17 wrote:I think the original answer was wrong as well.
An answer to the original question:
Recapture of Section 179 potentially happens when the business percentage falls to 50% or less (which includes converting it to personal use). When that happens, the depreciation you previously took is retroactively re-calcuated using Straight Line depreciation (and without Section 179).
If this newly calculated amount is less than the depreciation that you actually took, the difference is "recapture" of Section 179 and you 'pay back' the previous deduction to match the newly calculated about (using Straight Line depreciation).
In most cases, when this happens at the end of the depreciation Recovery Period, the results of the calculations are the same, so there is no recapture. HOWEVER, vehicles have depreciation limits when may extend the depreciation well past the 5 year Recovery Period. If your vehicle was subjected to those limits, Section 179 recapture is likely to occur. Most vehicles over $15,000-ish that were "placed in service" before 2018 and most vehicle over $50,000-ish that were "placed in service" after 2017 are subject to those limits.
When SELLING the vehicle, you may be subject to 'regular' depreciation recapture if the vehicle is sold for more than its Adjusted Basis. That is a different type of recapture than from Section 179.
If the vehicle has been converted to persona use, is the depreciation recapture something that has to be done by the business on the business returns? Or is that done on the personal returns?
The business would be the one to report the depreciation recapture. A few things to keep in mind when converting business property to personal use.
I have a car I have used for business for 7 years. I am now retired and use it for personal use. How can you figure recapture
You don't need to figure Depreciation Recapture until you sell it.
You do need to know your "Adjusted Basis" for when that time comes.
The "Adjusted Basis" is the "Original basis" (your original cost or value) less the depreciation claimed (or should have been claimed).
There is almost always Depreciation Recapture and capital gain when selling rental real estate, but no so much with vehicles.
In fact, switching a vehicle to personal use might negate a business loss (there is no loss on a personal sale)
@MarilynMennetti wrote:I have a car I have used for business for 7 years. I am now retired and use it for personal use. How can you figure recapture
Were you claiming Actual vehicle expenses, or did you use the Standard Mileage Rate?
If you used Actual vehicle expenses, did you claim Section 179 or Bonus depreciation in the first year? Were you using accelerated depreciation (usually 200% DB, most common if vehicle was used over 50% for business) or were you using Straight-line (most common if vehicle was used 50% or less every year for business)?