Question

Section 179 Vehicle -- Year 3 carry over question

Forum|Forum|1 year ago
February 15, 2025
1 reply
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In 2022, we bought a car to use mostly for business (through a single member LLC), using the special depreciation allowance. We've always hit the over 50% rule, no issue but know that the % adjusts the carry forward amounts.

I knew to expect a carry forward amount for Year 2 because of the limited amount you can do for year 1. But what I wasn't expecting is a depreciation deduction Year 3. Even though it was to be an "up to 5 year deduction" depending on how expensive a car was. (under 6000 lbs)

I thought we'd run out of an amount to write off after year 2 because of what carried over.

When I look at the amount Turbo Tax autofills in, the three years combined are higher than the cost of the car.

Can someone explain why this may happen? Am I missing something? I don't want to take a deduction that we aren't allowed but it's auto filled in by TT (home and business) which alerted me it was using 179 carry over number to fill in.

The breakdown:

Cost of car $30,800, no trade in, under 6000 lb SUV

2022 - Special depreciation $16,518 for limited, accounting for approx 86.5% biz use)

2023 - carry forward depreciation auto filled by TT for Year 2 = $9365 (a year of 76% biz use)

2024 - showing carry forward depreciation $7086 (a year of 88% biz use)

Those three figures = 32,969 which is higher than original cost of car.

These #'s have always been calculated / carried over by Turbo Tax. So I hope there's a logical explanation about something I'm missing.

Lastly...

I know we cannot ever go back from actuals to standard mileage instead (which I knew would hurt us this year having driven about 10,000 miles this year where 88% of those were biz miles! But I figured that's the rub of having taken off the bigger amount Year 1. Does the IRS account for anything more on depreciation because of high mileage in this number chosen this year?

Thanks for any advice you can offer.

Deduction

1

1099erGirlAuthor

Just bumping to see does anyone have any suggestions? I've searched all over and not sure where to look. I try to seek info on sample charts of 5 years of info and can't see any samples where others situations match this one for TT calculations.

PatriciaV

Depreciation carried forward represents the amount of deduction you claimed in prior years that could not be claimed because it created a net operating loss. You will have additional depreciation for several years after you first place the vehicle into service for your business.

However, you may not be able to claim all the depreciation that's applied to your vehicle. In this case, you will have a carry forward each year until you can.

Here are the percentages for a five-year asset using the half-year convention:

Yr 1 = 20.00%

Yr 2 = 32.00%

Yr 3 = 19.20%

Yr 4 = 11.52%

Yr 5 = 11.52%

Yr 6 = 5.76%

Because you took special depreciation, the remaining balance is used to calculate your regular depreciation expense. If you look at the Depreciation Report that is included in your TurboTax return, you can track the depreciation that has been applied to your vehicle each year.

The screenshot below shows a truck purchased for $60,000 with special depreciation in the first year, a reduced depreciable basis, and 19.2% depreciation for the current year (final column). Total deprecation would be special plus prior plus current = $38,243.

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1

1099erGirlAuthor

Do you happen to have an explanation why by year 3 we are able to write off an amount that tops the three years combined to over the original cost of the car ? (When adding together Year 1 and 2, those amounts made sense to me. But by year 3, I figured it was over and we wouldn't have more deprecitation or at least not at the above $7000 mark TT calculated and carried over.

We do show a profit each year, so not making enough 1099 money isn't a concern for its calculation. We took the extra / special dep allowed year 1. Carry over year 2.

I wasn't sure if they take into account how much we drove it this past year? I figured we lose the higher write off later years based on mileage even though in 2024 our mileage was quite high and when I enter gas receipts the write off naturally it's way less. (Like $1000 gas receipts instead of .70c mile for about 9000 miles.)

I wasn't expecting an approx $7000 depreciation this year in addition to the actuals that were about $2000 total in gas and maint.) Before we file, I want to make sure this isn't a mistake. Your example is great for a higher priced car. Since ours was 30,800 I'm not sure why this year is topping beyond 32,000 when all three years are added together.