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?
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!
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.
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?
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?