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Per IRS Publication 946 How To Depreciate Property, on 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.

To enter this information into the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal to expand, then click Income. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Review on the "Other gains or losses:" row, then click + Add Form 4797 to create a new copy of the form or click Edit under "Form 4797 - Sales of Business Property" to review a form already created.
  3. Continue with the interview process to enter all of the appropriate information.
  4. On the screen titled Asset Sale - Assets Sold, click No.
  5. On the screen titled Form 4797 - Other Topics, click Yes.
  6. On the second screen titled Form 4797 - Other Topics, check Check here to enter recapture amounts under sections 179 and 280F(b)(2) when business use drops to 50% or less, then click Continue.
  7. On the screen titled Form 4797 - Depreciation Recapture, enter the recapture amount, then click Continue.

Note. You will need to enter the recapture income on the appropriate income schedule where the deduction was originally taken.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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