Re: Vehicle purchased 12/15/17 and depreciated und...
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New Member

Vehicle purchased 12/15/17 and depreciated under Sec 179. When can I stop worrying about recapture? Does the 5 years end 12/31/21(2017-2021) or 12/15/22(5 actual years)?

Would love link to where answer came from, for my records.
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Level 15

Vehicle purchased 12/15/17 and depreciated under Sec 179. When can I stop worrying about recapture? Does the 5 years end 12/31/21(2017-2021) or 12/15/22(5 actual years)?

Recapture of Excess Depreciation
If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. You also increase the ad-justed basis of your property by the same amount.
Excess depreciation is:
1.
The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus
2.
The depreciation that would have been allowable for those years if you had not used the property predomi-nantly for qualified business use in the year you placed it in service.To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period.

 

https://www.irs.gov/forms-pubs/about-publication-946

If the property is listed property (described in
chapter 5), do not figure the recapture amount under
the rules explained in this discussion when
the percentage of business use drops to 50% or less. Instead,
use the rules for recapturing excess depreciation in
chapter 5 under What Is the Business-Use Requirement.

see page 57

in the example in the 5th year 2019, acquired 2015, business use drops to 50% resulting in depreciation recapture

so in your case, since acquired in 2017, if business use drops to 50% or less in 2021, you'll have to recapture depreciation. 

 

 

in the future, a better idea is to take as much bonus depreciation (168k) as possible. there is no depreciation recapture if use drops below 50% ad it's not limited to business income. 

 

so the recomputed deprection assuming 

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Level 15

Vehicle purchased 12/15/17 and depreciated under Sec 179. When can I stop worrying about recapture? Does the 5 years end 12/31/21(2017-2021) or 12/15/22(5 actual years)?

Recapture is a thing for as long as you own the vehicle.  You just don't have to do a special section 179 repayment after 5 years.  That's 5 years from the in-service date of 12/15/17.

 

You always pay recapture when you sell depreciated business property.  With section 179, the property is fully depreciated so your cost basis is zero.  If you sell it for any amount, that amount is taxable capital gain, and is subject to depreciation recapture.  For example, if you keep the vehicle 6 years and sell it for $1000, you don't have to worry about the special section 179 rules, but that $1000 is taxable income as depreciation recapture. 

*Answers are correct to the best of my ability but do not constitute legal or tax advice.*
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