You cannot claim a depreciation deduction for listed property
(other than passenger automobiles) in years after the recovery period.
When determining if there is any depreciable basis (unrecovered basis)
at the end of the recovery period, you are considered to have used
this property 100% for business and investment purposes during all of
the recovery period. Therefore, there is no depreciable basis at the
end of the recovery period.
Passenger Automobiles
If you have unrecovered basis in your passenger automobile at the
end of the recovery period and you continue to use it for business,
you can deduct that unrecovered basis after the recovery period ends.
Unrecovered basis.
Unrecovered basis is the cost or other basis of the passenger
automobile reduced by any clean-fuel vehicle deduction, electric
vehicle credit, depreciation, and section 179 deductions that would
have been allowable if you had used the car 100% for business and
investment use.
If you continue to use your car for business after the recovery
period, you can claim a depreciation deduction for that business use
in each succeeding tax year until you recover your full basis in the
car. The maximum amount you can deduct is determined by the date you
placed the car in service and your business-use percentage.
Example.
In May 1994, you bought and placed in service a car costing
$30,000. The car was 5-year property under GDS (MACRS). You did not
elect a section 179 deduction for the car. You used the car
exclusively for business during the recovery period (1994 through
1999). You figured your depreciation as shown below.
|
Year |
Percentage |
Amount |
Limit |
Allowed |
| 1994 |
20.0% |
$6,000 |
$2,960 |
$2,960 |
| 1995 |
32.0 |
9,600 |
4,700 |
4,700 |
| 1996 |
19.2 |
5,760 |
2,850 |
2,850 |
| 1997 |
11.52 |
3,456 |
1,675 |
1,675 |
| 1998 |
11.52 |
3,456 |
1,675 |
1,675 |
| 1999 |
5.76 |
1,728 |
1,675 |
1,675 |
| Total |
$15,535 |
At the end of 1999, you had an unrecovered basis of $14,465
($30,000 - $15,535). If in 2000 and later years you continue to
use the car 100% for business, you can deduct each year the lesser of
$1,675 or your remaining unrecovered basis.
If your business use of the car had been less than 100% during any
year, your depreciation deduction would have been less than the
maximum amount allowable for that year. However, in figuring your
unrecovered basis in the car, you would still reduce your basis by the
maximum amount allowable as if the business use had been 100%. For
example, if you had used your car 60% for business instead of 100%,
your allowable depreciation deductions would have been $9,321 ($15,535
x 60%), but you would still have to reduce your basis by
$15,535.
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