WHERE DO I ENTER PRIOR SPECIAL DEPRECIATION ?

[j_ellamaa]

I have a new client who brought in his depreciation schedule and received PRIOR SPECIAL DEPRECIATION on equipment. There is a field to enter prior depreciation but not PRIOR SPECIAL DEPRECIATION. Technical support couldn't assist me and read me all kinds of things from the IRS website which I read myself. The schedule he brought in from HRB has a column for PRIOR SPECIAL DEPRECIATION. I dont know how to proceed. Has anyone dealt with this before?

[TaxGuyBill]

Right above the "prior depreciation" is the line you want to enter the prior Special Depreciation.

[j_ellamaa]

Is that prior though? It lists it under the special depreciation column on the depreciation schedule BUT doesnt specify PRIOR so I just want to make sure I allocate it properly. And thank you for responding to my post I greatly appreciate your time!

[TaxGuyBill]

Special depreciation only applies to the first year.  Entering it there will do what you want it to do.

As a side note, if you check the box that the asset is Qualified Property for the Special Depreciation Allowance, it will automatically turn that Special Depreciation box pink to make you enter it there.

[Just-Lisa-Now-]

If the asset wasnt purchased in the current year, it couldn't be current special depreciation. The box above the Prior Dep is where it goes for the Special Dep taken on the asset.

[j_ellamaa]

Thank you it is showing correct now. How would I do that for a Vehicle? It wont allow me to select qualified property without overriding it?

[TaxGuyBill]

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@j_ellamaa wrote:

Thank you it is showing correct now. How would I do that for a Vehicle? It wont allow me to select qualified property without overriding it?

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Is the business percentage this year 50% or less?  That is why it automatically does that.

It seems like this is the first year the business percentage dropped to 50% or less.  That means you need to recapture depreciation, but I don't think the program does that automatically. 

You would need to calculate the depreciation as if Straight-Line was used the entire time (with the Special Depreciation Allowance) and manually fill in the bottom of the "Enterable 4797" about the recapture.  You then need to manually enter that recapture amount as income on the appropriate spot (Schedule C if that is what this vehicle is being used for).

Then for the depreciation, you just enter the recalculated amount of "prior depreciation" (using Straight-Line and no Special Depreciation Allowance).

I know it is complicated, but does that make any sense?

[j_ellamaa]

Business percentage is 100% and im not exactly following.

[TaxGuyBill]

On Line 15 of the vehicle worksheet, did you accidentally check that it qualifies for the Standard Mileage Rate?  If they took the Special Depreciation Allowance, that box should be "No".

[taxfaks]

I know this is an old post and I don't know if it got answered. However, I had the same issue in the 2022 version. I finally figured out the solution. If the client has prior bonus depreciation or prior section 179 expense, you have to add up all prior depreciation and enter the total in the 'Prior depreciation' field.

For instance, if the client has $5,000 in prior depreciation, $7,000 in prior section 179 & $2,000 in prior bonus -- you would enter the total of $14,000 as Prior Depreciation. Hope this helps!