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Old 11-11-2015, 08:21 AM
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Section 179 SUV

I am planning to buy a SUV (>6,000 lbs) and had a question about section 179 and depreciation that I couldn't find elsewhere. Let's say I buy a car for 50K on Dec 1. From Dec 1 to Dec 31 2015, I find that I used the vehicle for business use 90% of the time. Starting next year though, the vehicle usage drops to 60%.

When filing my taxes for TY2015, I understand I can take 179 for the car up to 25K. Does the 25K get derated to 22.5K or is it still 25K since the 50K purchase (even when accounted for the 90%) still exceeds 25K?

Next question, do I owe any recapture in TY 2016 for the difference between 60% and 90% use that I claimed in TY2015? As I understand it, recapture only comes in if business use drops to 50% or less, but it doesn't seem to make sense there isn't some adjustment.

Finally, what happens with standard depreciation of the rest of the amount from year to year? Does the depreciation just get derated in that individual year by the business use percentage, or is there some retroactive adjustments that need to be made?

Thanks in advance.



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Old 11-11-2015, 02:53 PM
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I am planning to buy a SUV (>6,000 lbs) and had a question about section 179 and depreciation that I couldn't find elsewhere. Let's say I buy a car for 50K on Dec 1. From Dec 1 to Dec 31 2015, I find that I used the vehicle for business use 90% of the time. Starting next year though, the vehicle usage drops to 60%.=====>>Aslongas your SUV with a gross vehicle weight rating above (>6K lbs) but no more than 14K lbs qualify for expensing up to $25K as the SUV is financed and placed in service prior to Dec. 31 and meet other conditions. In other words, you can deduct almost the entire cost of the vehicle in the first year you use it.So, your SUV is not subject to luxury car rule; For example, passenger vehicles, trucks, and vans not meeting the guidelines above and are used more than 50% in a qualified biz use, the total deduction for depreciation including both the Section 179 expense deduction as well as Bonus Depreciation is limited to $11,060 for 2015. Also, you usually need to recapture the sec 179 deduction if, in any year during the suv's recovery period, the percentage of biz use drops to 50% or less(<50%). In the year the business use drops to 50% or less, you should include the recapture amount as ordinary income in Part IV of Form 4797.

When filing my taxes for TY2015, I understand I can take 179 for the car up to 25K. Does the 25K get derated to 22.5K or is it still 25K since the 50K purchase (even when accounted for the 90%) still exceeds 25K?=====>You can still claim $25K UNLESS the biz use drops to 50% or less;also, you cannot deduct more than your net income for the year. So say, your net income is $15K, you cannot use the whole of $25K deduction to generate a tax loss for the year.but you can claim up to $15K.

Next question, do I owe any recapture in TY 2016 for the difference between 60% and 90% use that I claimed in TY2015? ===>No you do not owe any recap in TY 2016 ;as said above UNLESSS the biz use drops to 50% or LESS.


As I understand it, recapture only comes in if business use drops to 50% or less, but it doesn't seem to make sense there isn't some adjustment.==>>>Correct;no adjustment UNLESSS your biz use drops to 50% or LESS. Once the rate drops to 50% or LESS then, you must prepare the 4797, Part IV, to calculate the recapture manually.

Finally, what happens with standard depreciation of the rest of the amount from year to year? Does the depreciation just get derated in that individual year by the business use percentage, or is there some retroactive adjustments that need to be made?==>>in general, you MAY apply sec 179 exp first and then bonus depreciation In prior years, Bonus Depreciation would be taken after the Section 179 Spending Cap is reached. Note:in prior years before 2015, Bonus Depreciation was available for new equipment only; in 2015, Bonus Depreciation is not available at all.and MACRS last.SO you may apply sec 179 and then MACRS rule on the SUV on your 2015 return. When you sell, exchange, or otherwise dispose of the property, you must recapture your sec 179 as Sec 1245 Property and report it on form 4797 and claim expenses on SCh C of 1040.



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