Hi Guys, You may recall… we are retired now and I am trying to do our somewhat simple taxes this coming year. I am starting by going over the CPA’s tax work for the past couple of years and trying to match the figures I gave him and the figures he input on our tax forms, etc. So, I have started by going over 2021 Income taxes… I will be asking many many questions on this board and I am hoping you can put up with me. (thanks in advance). So, my first question is Vehicle Depreciation. Before we retired, we owned a business – Started it in 2006, sold the business in 2013 (the car was NOT sold with the business assets). On our 2021 taxes, the CPA included vehicle depreciation for this one vehicle that we drove for business. We bought this vehicle in 2009 and sold it in 2015. (I am not even sure you need all these dates…) So, in looking at the 2021 taxes, I see that it is still being depreciated. From what I can remember, there may have been 2 types of depreciation that our CPA could have chosen to do with this vehicle? Not sure. I guess I am just looking for the short answer as to how long I need to continue depreciating this vehicle… and how the math works… For those of you not familiar with our situation – we are both retired now, our income is social security and stock dividends, and some stock sales every year. So, our taxes are pretty simple… so I am going to start doing the taxes myself this year. I wish I could just ignore this one vehicle being depreciated… but I am sure that is not wise. LOL. Thanks for your advice.
Side Note: On the 2021 Taxes, it says MACRS was the method used… I think that stands for *Modified Accelerated Cost Recovery System." I also have the mileage for end of year for every year we owned ths car… and what the mileage was when we bought it and sold it… Thanks again…
The whole thing doesn’t sound correct to me. Usually you can only depreciate a [business] asset while you still own it. When you sell it, if the sale price is higher than the depreciated value, you have to “recapture” the depreciation that was taken over the sale price. I’ve never heard of an asset being depreciated years after it has been sold. But tax law is often mysterious, so our resident tax expert, @aj485 would know the answer.
@footsox Actually, I would say that you can only depreciate a business asset (like a car) while it’s in service for the business. Since the business was sold in 2013, I would say that any depreciation that was taken since 2014 is questionable.
Now, I seem to recall that you also had rental properties, so it may be possible that you had legitimate business expenses in 2014 associated with the rentals that allowed you to take depreciation on the car in 2014 and 2015. That said, after you sold the car, there would have been no allowable depreciation. From IRS tax topic 704 https://www.irs.gov/taxtopics/tc704
See item 1? “It must be property you own.”
So once you sold it, there would not have been any allowable depreciation, meaning that the last tax return you should have taken depreciation for that car would have been your 2015 tax return.
Edited to add: Did you tell the CPA that you sold the car?
Hi AJ and MarkR. Thanks for your replies. Yes! I forgot that we owned the 3 rent houses and after selling the business, we used that same care as our car for tending to the rent houses. Sorry to leave that out. We sold the last rent house in July 2020. These were 2021 Taxes I was reviewing. Another thing I left out. I found this on a “worksheet” that the CPA had sent back with a copy of the taxes that were filed. I need to look and see if that was just on the “worksheet pages” or was actually in the tax forms. And, by the way, It showed some amount for depreciation in one of the first columns, but then the remaining columns were zero. Perhaps the CPA was showing us that he was no longer depreciating this car?? And, yes, we did tell the CPA the date we sold the car. We sold the car in Dec. 2015. Thank you so much for your replies.
So, you could potentially have depreciation on the car until you sold it, but not after that. If you sold it for more than the depreciated value, you would have had to recapture depreciation that you took.
If you didn’t own any depreciable assets (including, but not limited to, rental houses and a car used for the rental houses) in 2021, you should not have any depreciation in 2021. So, I will ask - when you say ‘2021 taxes’ - is that the year that’s printed on the tax forms, or the date when you filed them? You should always refer to the year for taxes as the year that’s printed on the tax forms, not as the date you filed them, and I think you’ve had an issue with that before.
Yes, you should do that - as I said, your 2021 taxes should have NO depreciation if you had sold all of your depreciable assets in or before 2020.
I have suggested before that if you have questions about things the CPA produced, you probably need to ask him. We can only answer questions based on what your interpretation of what he’s provided is, and it seems like there are some issues with that.
Hi guys, Thanks again. I took another look at the 2021 taxes. (for the year 2021 printed on the tax forms). It seems the depreciation is only on the worksheet pages the CPA included. And on the worksheet forms, there are figures in the “Prior Year” columns, but all zeros in the “current year” columns. So, I think he was just including the vehicle depreciation on the worksheet forms and nowhere else. So, my conclusion is going to be that I am having NO vehicle depreciation in the Tax year 2023, when I file the taxes. Thanks for all your answers and suggestions. I truly appreciate it.
Sorry if this is going to sound harsh, but I’m concerned that you don’t have enough understanding of tax law to file taxes on your own at this point. Yes, I understand that you think your taxes are simple now, and they may very well be. But you didn’t seem to have a basic understanding that depreciation is only taken on a depreciable asset that is used to produce income, and since you no longer have any businesses or rentals that are producing income, you shouldn’t even be thinking about claiming depreciation. And this isn’t the first time that this type of question has occurred.
If you are unwilling to pay your CPA any longer, I will once again STRONGLY SUGGEST that you seek out an AARP Tax-Aide location near you to help with your taxes. They a volunteer organization that prepares taxes for free, focusing on seniors, but often for almost anyone. You do not have to be a member of AARP to take advantage of their service. Here is a link to their web page that you can use to find a site near you. AARP Foundation Tax-Aide Locator Since it’s not tax season, they aren’t showing locations at this time, so you will probably need to check back in January or February.