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.
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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 2006 through 2011). If you continue to use the car 100% for business in 2012 and later years, you can deduct $1,775 in 2012 and also in later years until the $12,793 of unrecovered basis is used up. In years of partial business use, the deduction will be limited to $1,775 multiplied by the business-use percentage.
If you had not used the car for business 100% of the time in all prior years, your unrecovered basis would still be $12,793. That is because for purposes of figuring unrecovered basis, you must reduce original basis by the depreciation that would have been allowed based on 100% business use.

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