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

43.10 Recapture of Deductions on Business Car, Truck, or Van

If you use your car, truck, or van more than 50% for business in the year you place it in service, you may use MACRS accelerated rates (43.5). If business use drops to 50% or less in the second, third, fourth, fifth, or sixth year, earlier MACRS deductions must be recaptured and reported as ordinary income. In the year in which business use drops to 50% or less, you must recapture excess depreciation for all prior years. Excess depreciation is the difference between: (1) the MACRS deductions allowed in previous years, including the first-year expensing deduction and bonus first-year depreciation allowance (43.4), if any, and (2) the amount of depreciation that would have been allowed if you claimed straight-line depreciation (43.6) based on a six-year recovery period.

The recapture rules do not apply if you elected straight-line recovery instead of applying accelerated MACRS rates.

Recapture is reported on Form 4797, which must be attached to Form 1040. Under the listed property rules, the 50%-business-use test and recapture rule apply to cars, trucks, vans, boats, airplanes, motorcycles, and other vehicles used to transport persons or goods, but there are exceptions for ambulances, hearses, and other trucks and vans that are considered qualified non-personal-use vehicles (43.4).

Any recaptured amount increases the basis of the property. To compute depreciation for the year in which business use drops to 50% or less and ...