Per IRS Publication 946 How to Depreciate Property
, starting on Page 23: When Must You Recapture the Deduction?
You may have to recapture the section 179 deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. In the year the business use drops to 50% or less, you include the recapture amount as ordinary income in Part IV of Form 4797. You also increase the basis of the property by the recapture amount. Recovery periods for property are discussed under Which Recovery Period Applies
in chapter 4. CAUTION! If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Instead, use the rules for recapturing depreciation explained in chapter 3 of Pub. 544 under
Section 1245 Property. For qualified real property (described earlier), see Notice 2013-59 for determining the portion of the gain that is attributable to section 1245 property upon the sale or other disposition of qualified real property. You can find Notice 2013-59 at www.irs.gov/irb/2013-40_IRB/ar14.html.
CAUTION! If the property is listed property (described in
chapter 5), do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Instead, use the rules for recapturing excess depreciation in chapter 5 under
What Is the Business-Use Requirement.
Figuring the recapture amount.
To figure the amount to recapture, take the following steps.
- Figure the depreciation that would have been allowable on the section 179 deduction you claimed. Begin with the year you placed the property in service and include the year of recapture.
- Subtract the depreciation figured in (1) from the section 179 deduction you claimed. The result is the amount you must recapture.
You will enter this information into the Individual (1040) TaxAct® program as follows:
- From within your TaxAct return (Online or Desktop), click on the Federal tab. On smaller devices, click in the upper left-hand corner, then select Federal.
- Click Income directly below the Basic Info tab. On smaller devices, Income will be listed below Federal after clicking on .
- Click Review next to Other Gains and Losses
- Click Add to create a new copy of Form 4797 - Federal Sales of Business Property
- Click No on the screen titled Asset Sale - Assets Sold
- Click Yes on the screen titled Form 4797 - Other Topics
- Check the box Check here to enter recapture amounts under Sections 179 and 280F(b)(2) when business use drops to 50% or less
- Click Continue and then enter the amounts in the applicable fields.