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Per IRS Publication 946 How To Depreciate Property, page 57:

Recapture of Excess Depreciation

If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. You also increase the adjusted basis of your property by the same amount.

Excess depreciation is:

  1. The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus
  2. The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service.

To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period.

Where to figure and report recapture. Use Form 4797, Part IV, to figure the recapture amount. Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. For example, report the recapture amount as other income on Schedule C (Form 1040 or 1040-SR) if you took the depreciation deduction on Schedule C. If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Schedule 1 (Form 1040 or 1040-SR), line 8.

Please see the publication for a detailed example.

You will enter this information into the TaxAct program as follows:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Income directly below Basic Info in the Federal Quick Q&A Topics menu (Online users click Income below the Federal heading in the left column)
  3. Click Review next to Other Gains and Losses
  4. Click +Add Form 4797 to create a new copy of Form 4797 - Federal Sales of Business Property
  5. Click No on the screen titled Asset Sale - Assets Sold
  6. Click Yes on the screen titled Form 4797 - Other Topics
  7. Check the box Check here to enter recapture amounts under Sections 179 and 280F(b)(2) when business use drops to 50% or less
  8. Click Continue and then enter the amounts in the applicable fields.

Note. On the following screen, you are provided the recapture amount. As noted on this screen, you will need to enter the recapture income on the appropriate income schedule where the deduction was originally taken.


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