AMT dep allowed/ allowable-1 is too large.Depreciation cannot exceed business basis.

[psheegog]

I sold a business vehicle this year and I keep getting the following message for Check This Entry on my federal review: "Schedule C (*business name*) -- Car & Truck expenses worksheet (*car make and model*): AMT dep allowed/ allowable-1 is too large. For disposition calculations, depreciation cannot exceed business basis. Please see Tax Help for this field.

Anyone have ideas as to why this could be happening?

[MichaelDC · Accepted solution]

See the possible fixes below. If you have any other details regarding this question, please feel free to post them in the comment section.

What this means is that you have set the depreciation value to high in comparison to what the vehicle is worth. What you can do is:

1.       Delete the vehicle and start over again 

2.       Add it back in with its original service date. 

3.       Calculate your estimated depreciation per year based on miles used for business 

Also try these fixes:

Go back to the sale of vehicle and delete any numbers in the AMT section.

or

In Smart check, when the worksheet is displayed, right click on the field (Line 50 and/or Line 51).  From the dropdown menu displayed, select "Override".  You should then be able to enter any number that you want.

Depreciation assumes that assets used to generate business income will wear out, get used up, or become increasingly obsolete over a period of time. For taxation purposes, depreciation lets you deduct the "used up" portion of that asset's cost every year, until the entire cost is used up or the business no longer owns the asset.  You cannot claim more in depreciation than the value of the item. In this case, your vehicle.

The prior AMT depreciation would be the same as the prior regular depreciation if the depreciation was calculated by using the standard mileage deduction.  

It would also be the same if, when you depreciated the vehicle using the actual costs (fuel, tires, etc.). rather than the standard mileage, you chose a straight line depreciation method.  (This is explained in the screens entitled "Let's Figure Out How to Deduct Your Vehicle Costs" and "Section 179 Deduction" which includes a link to on-demand tax guidance about the depreciation deductions you had used for your vehicle in the past).

If you don't remember, that's OK, use the defaults presented in TurboTax.  If you've had the vehicle longer than 5 years, it would be fully depreciated  under both the regular and AMT methods.

To get back to this in TurboTax:

·         Under "Business Income and Expenses" select start/update next to Profit or Loss from Business

·         Click  "edit" on the Business Summary

Scroll down to business expenses section, and click update next to "Business Vehicle Expense"

Refer to IRS Publication 946, How to Depreciate Property if you require more detailed, in-depth information.

[psheegog]

Thank you for the assistance, deleting the car and re-entering it with new depreciation numbers fixed the issue!

[MichaelDC]

Very well done! Good Luck!

[celestelingo]

how did you calculate the numbers? business sold vehicle this year and it was only in service for one year so I   keep getting the same form as above.

[masonry-guy]

If your basis is 0, make sure to leave the gain/loss and AMT gain/loss boxes empty.  Do not type "0" in the box, it will generate errors later.  

[barrypaula]

If you sold the vehicle and had it for more than 5 years can you just delete it and not even have it in the taxes?

[DaveF1006]

No you just can't delete it especially if you have claimed expenses on it in the preceding years. See if you can adjust the depreciation to the cost basis of the automobile and see if that will clear up the issue.

[BradCA]

@MichaelDC 

I deleted the vehicle and re-entered it, but TurboTax still says the depreciation is too high.  I entered "0" for depreciation, but somehow there's a "35" entered on line 29. for "Depreciation and Section 179 limit for luxury cars.  I didn't enter that.  And TurboTax says that "26" is what's allowed or allowable.  That doesn't seem like a big difference anyway, but I'd like to fix it if I can.  Any other suggestions?

[Semantax]

Appreciate the suggestions you've shared, thanks! I followed your original suggestion to delete and re-enter the car. When re-entering the car TT calculated the depreciation as $5,062, which is much different than the $15,262 from line 36 (Prior Depreciation) of my 2018 “Car and Trucks Expense Worksheet”.  When I use $5,062 I do not get the "Depreciation cannot exceed business basis" error during the review, but when using $15,262 or match the full basis of $20k (which you also recommended trying) I get the error during the review.  Can I go with $5,062 even though it differs from what had been on my 2018 return?   

[camwest13]

When I click "edit" on "Sale of Business Property" it takes me to a page to declare "Any other properties".  It does not actually let me delete or edit my vehicle entry, so I'm stuck in an infuriating loop where this problem is flagged and prevents me from filing but then I am given no ability to edit/fix the problem.  Please help.

[mickeydarkey]

Check 1. the amount you paid for the car 

and 2. The fair market value of the car when you first started using it for business.

The 'AMT dep allowed/ allowable-1' amount is the largest amount you can put into the Fair Market Value Amount.

Basically, its telling you based on the Amount you paid for the car and the time between then and when you first used it for business, The Amount in the [AMT dep allowed] is the highest your vehicle is worth

[donaldkeith8]

does this apply to a vehicle that had previously been depreciated 100% via section 179... ? I took this depreciation and then sold it 2 years later and I am having the same issues with "Amt depreciation is too high"...should i delete the vehicle and follow the steps you have listed? thanks

[ReneeM7122]

You may not  need to delete the vehicle.  Try first to calculate the recapture, edit the asset, indicate that you disposed of it, enter the disposition date and TT should calculate the recapture gain (if any) for you. Section 179.   Recapture is the difference between what you expensed via 179 and what you would have depreciated under normal MACRS depreciation. and then recapture the Section 179 depreciation.

If actual expenses are claimed on a business vehicle, the Section 179 deduction, MACRS, and the special depreciation allowance must be recaptured if, during the recovery period, the business use of the vehicle drops to 50% or less. (ie. you sold your vehicle)  The recaptured amount is the excess of Section 179, MACRS, and the special depreciation allowance claimed versus what would have been allowed had MACRS straight-line depreciation been claimed for every year.

Here is a TurboTax article about section 179 recapture.

[yankeeman9]

What if the car was totaled in an accident?