Listed property deprecation recapture vehicle

[suerusso1]

I have a vehicle that was put into service 01/01/2015 and converted to personal use 01/01/2017.  No sec 179 depreciation was taken. How do I know if this vehicle has depreciation recapture?  Where would that be reflected on 1040 or 4797?

[ATClare95]

You may have to recapture depreciation if you took any Sec. 179 depreciation, Sec. 168(k) bonus depreciation, or if you used MACRS for your depreciation method. Essentially, you need to recalculate depreciation as if you used the straight-line method the entire time. This will be treated as a disposition on Form 4797 and any depreciation recapture calculated will carry to your 1040 as ordinary income. See page 60 of Publication 946 for an example and more information.

[suerusso1]

No sec 179 taken on this vehicle.  Where would I find out prior depreciation taken and if MACRS was used?

[ATClare95]

If you claimed depreciation on your prior tax returns, you should have also filed Form 4562. This form is used to report depreciation deducted for the year, and vehicles get listed separately on page 2. I would pull the 4562 from your prior year tax returns and use that to see what depreciation you claimed.

[Yupthatsme19]

Would we recapture the deduction under depreciation deduction? My depreciating deduction is $4,190. Recovery period is 5.00. How would I calculate the recapture after conversion to personal use after the first year? 

would I have to do this every year? 

[Cynthiad66]

@Yupthatsme19 - Yes.  But only when the vehicle is sold or traded.  Merely converting the property to personal use does not mean that you immediately recapture the depreciation.

When you sell or trade the vehicle, you will then recapture the depreciation.  You have to indicate to the program, in the Business Vehicle Expense section, that you disposed of the vehicle. You then have to proceed through the rest of the screens and enter the sales price, cost, and prior depreciation equivalent.

For instance, if your business was a schedule C then you would go to vehicle expenses on the Schedule C then select vehicle expenses then follow the prompts to  question on whether you sold the car.  You answer yes at that point, the TurboTax will prompt you to recapture the depreciation and to calculate the gain on the sale.

[Yupthatsme19]

@Cynthiad66  I would rather just recapture the depreciation now and convert to personal use.

[ColeenD3]

Again, please keep the questions in one single thread. It is hard to follow what is going on when you post in so many different places. 

If you did not take a section 179 or bonus depreciation and take the entire amount in one shot, you do not have to recapture anything.

Get expert assistance by calling us at 1-800-4-INTUIT (1-800-446-8848). In addition, the TurboTax support page provides other resource links and help tools.

[ryanbach1028]

Thanks @Cynthiad66 for your response. When I follow the instruction in your response, TurboTax ask me this question "Depreciation Recomputed on this property using the Straight-line Depreciation Method: "

The listed property is an old vehicle (year 2005) that I used for both personal and business. I never take any depreciation on the car. I gave the car to my daughter this year.

  My questions are:

1. Do I need to go through this recapture depreciation for this vehicle even though I never take any section 179 depreciation for it ? If no, do I need to check off the "section 179 recapture" check mark in the "Any Other Property Sale ?" questionnaire ?

2. If yes, how do I compute the amount using the straight-line depreciation method ? Would you please provide an example ?

Thank you

[KrisD15]

"1. Do I need to go through this recapture depreciation for this vehicle even though I never take any section 179 depreciation for it ? If no, do I need to check off the "section 179 recapture" check mark in the "Any Other Property Sale ?" questionnaire ?"

No, since you gave the vehicle to your daughter and you did not take either bonus depreciation nor Section 179, you would not have  bonus depreciation to recapture. 

If there s a checkmark selecting "A recapture of previous section 179" and you did not use that deduction, unselect (uncheck) that box and continue. 

"2. If yes, how do I compute the amount using the straight-line depreciation method ?  Would you please provide an example ?"

No need in your case; however, even if you used the standard mileage rate, you were claiming depreciation. Depreciation is built into the standard rate. The amount attributed to depreciation is determined each tax year. You would need to go through the yearly mileage claimed, determine the amount attributed to depreciation and add them up. 

This amount of depreciation is then retained by the vehicle meaning when it is sold, it MAY need to be claimed at that time. 

In your case, since you gave it to your daughter, and you claimed no bonus deduction or section 179, you would have no recapture to report. 

When you daughter sell the vehicle, SHE MAY need to recapture the depreciation at that time. 

It would be figured the same way as if you sold it this year, however the personal and business use will need to be adjusted to account for the additional time she will have used it. 

"Adjusted basis for depreciation" would be the basis when put into service less the depreciation claimed. 

Subtract this adjusted basis from the sales proceeds. 

If there is a gain, the gain attributed to the depreciation would be the amount to recapture, however the amount to report would be further reduced by the percentage of business use. 

Example:

You used the vehicle 50% business for four years and used the standard mileage rate which resulted in $1,000  depreciation.

The vehicle was worth 15,000 when you started using it.  

You give the vehicle to your daughter. 

No loss, no gain, no recapture, no reportable income.

Your daughter sells it after using for two years for 15,000. 

Your daughter would need to recapture the 1,000 depreciation, but that would be reduced to only 30% to account for the two years of her personal use. 

If your daughter sells it for less than the adjusted basis of $14,000, there would be no reporting. 

@ryanbach1028

[domainxh]

Some follow-up questions to your example. 

1. After gifting the vehicle to the daughter, in my Rental Properties and Royalties section, do I `Delete` the vehicle from `Vehicle Summary`?

2. If instead of gifting the vehicle, I purchased it for $15000, and sold it for $8000. With $3000 of depreciation using standard mileage over a period of 3 years. How do I calculate  "Depreciation Recomputed on This Property Using the Straight-Line Depreciation Method??

[PatriciaV]

1. No, do not delete the vehicle. Instead, report that you stopped using the vehicle for business purposes. This checkbox appears on the page "Tell us about your business vehicle." Check the box and enter the date you stopped using it for business. Continue through all questions regarding the vehicle. Look for a page "Do any of these apply to the [name of vehicle]?" Here you would check the box for "You gave it away as a gift." TurboTax will help you determine how to report this gift in your return.

2. If you sold the vehicle, first report you stopped using it for business and the date. Then enter the sales price when asked, along with any other information TurboTax needs to complete the sale. If straight-line depreciation is required, TurboTax will handle this for you.

@domainxh