Why will Turbo Tax not calculate the recapture tax of a Section 179 asset?

[northriver]

A year ago, I purchased a 4-wheel drive ATV and took the 179 deduction. I sold the vehicle a year later but there was no re-capture tax indicated. Why is this?

[TaxGuyBill]

The recapture of Section 179 is an "Unsupported Calculation", so TurboTax does not do that.  You need to MANUALLY calculate and enter it.

EDIT:  However, I see now that you SOLD it, which means you don't do recapture of Section 179, you just do 'regular' depreciation recapture.  See my comment below.

[northriver]

Thank you for your help. Can you help me out with the formula? As an example, an ATV that I purchased for $6,000 in May 2017, taking $6000 of the 179 deduction and selling it in April 2019. Assuming a 7 year depreciation schedule on the ATV. I'd really appreciate your assistance with this as I've never dealt with it before.

[TaxGuyBill]

I'm sorry, I missed that you said you SOLD it.  That means you DON'T do Section 179 recapture, but just do the regular 'recapture' of depreciation when selling it.  You should be able to go through the "asset", indicate it was sold, and enter the sales information.  The program should be able to do that.

[TaxGuyBill]

I should also note that if it was not always 100% business use, the program does NOT do it correctly, and once again, you would need to do some manual calculations.

The sale will show up on Form 4797, which will flow to Line 14 of Schedule 1.

[Anonymous · Accepted solution]

the 179 recapture should be on form 4797 look at part IV on second page.

in  most case section 179 recapture has no effect on taxable income or taxes when a business asset sold.  the reason is that basis goes up by the disallowed depreciation producing a smaller gain or larger loss or even changing a gain into a loss.  

an oversimplified example  

say you sell a 100% business use asset for $1,000 for which you paid $5,000 and took $5,000 in 179 depreciation.

if there was no 179 recapture you would have ordinary income of $1,000   

with 179 you have $5,000 of ordinary income from the recapture and since your basis is now increased to $5,000 you have a $4,000 ordinary loss on sale  - net $1,000 of ordinary income    

states may be different ,  

[northriver]

Thanks for your help. Is there as standard formula that I can use to determine recapture? I have several items with depreciation schedules of 7 years that I bought within the past few years that are subject to recapture due to the fact that I'm closing down my business this year. Again, thanks for your help.