Reporting recapture on Sch C vehicle with less than 50% business use
New one for me! My sole proprietor client purchased a Jeep with a GVWR over 6,000 lbs in 2023. Business use was 70% and we took special depreciation plus accelerated ($29,201 total). She wanted the tax savings.
In 2024 business use was 88% and depreciation was $5,007.
In 2025 business use dropped to 33% requiring recapture over S/L which creates income of $22,041.
- Recapture is calculating on Form 4797 Part IV column b (section 280F(b)(2)).
- I am reporting the $22k recapture income on line 6 of her Schedule C. It is subject to ordinary and SE tax.
- The recapture amount does not increase her basis in the Jeep.
Do I have this right?
I'm also getting a message on the depreciation schedule: *When there is unrecovered basis, Current Depreciation is calculated using the MACRS Table with a Depr. Basis of 3,283 times the table rate of 0.2000 subject to Sec. 280F limits.
No depreciation is calculating at all for 2025. I think this is correct because of the low business use and switch to S/L but I've never seen this before.
