J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

43.8 Depreciation After Recovery Period Ends

If your business use of a car, truck, or van during the recovery period is 100% and your deductions are limited by the annual ceilings (43.4), any remaining basis that was not deducted because of the ceilings may be depreciated in the years after the end of the recovery period.

If the vehicle was used less than 100% for business, any unrecovered basis may be deductible, but to determine unrecovered basis, original basis must be reduced by the depreciation that would have been allowed had the vehicle been used 100% for business.

EXAMPLE

In January 2006 you bought a used car costing $28,600 that you used 100% for business every year from 2006 through 2011. You elected not to claim first-year expensing for 2006. Your depreciation deductions for the six-year recovery period under the 200% declining balance method were limited because of the annual deduction ceilings (Table 43-2). For 2006 through 2010, you deducted the annual ceiling amounts. For 2011, your deduction ($1,647) was based on the MACRS half-year convention rate table (Table 43-4) because this amount was less than the annual ceiling ($1,775). Total depreciation deductions for 2006–2011 were $15,807, as shown below.

At the beginning of 2012, your unrecovered basis in the car is $12,793 (the original basis of $28,600 minus the $15,807 of depreciation deductions allowed from ...