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Level 2
posted Apr 10, 2025 11:38:14 AM

Asset basis adjustment following Sec 179 recapture

I need to recapture Sec 179 elections after business use fell below 50%.  I have a few related questions.

 

1) where do you report the recapture/ income amount on schedule E?  The Sec 179 benefit was reported on Sched E originally

2) How to you adjust the asset worksheet for the assets previously taking the Sec 179 election?  I need to establish a revised basis and get turbotax to calculate the correct depreciation amounts going forward.

 

Thanks for any insights.

0 3 1504
3 Replies
Expert Alumni
Apr 15, 2025 10:32:09 AM

Here are the answers to your questions:

  1. The recapture amount will be listed as additional income on your Schedule E. Add it as cash, check, etc.
  2. The cost of your vehicle doesn't change, the business use percentage changes and the life actually runs longer due to the change to straight line depreciation (no longer an accelerated rate) and the recaptured amount.

@GAP4

[Edited: 04/16/2025 | 2:54 PM PST]

Level 2
Apr 15, 2025 12:21:24 PM

Thanks.  Very helpful.

 

Seems that the best place to add the recapture is to Rental Revenue on Schedule E (even though it seems a bit odd).  Likewise, may be best to add the recapture as a new asset with the recaptured value as the new starting point for depreciation but with a shorter depreciation to line up with the remaining life. Or should the depreciation start again with the original useful life (in this case 5 years) to make the depreciation calc simple?

Expert Alumni
Apr 16, 2025 2:52:30 PM

The recapture does belong on Schedule E and you may see a Form 4797 in your file (Part IV, line 35, which only goes to the income of the rental, not any place else on the tax return.

 

The cost of your vehicle doesn't change (my error corrected in previous answer), the business use percentage changes and the life actually runs longer due to the change to straight line depreciation and the recaptured amount.