Recapturing the Section 179 Expense Deduction

Remember that to claim the Section 179 expense deduction for a piece of property, you must use the property at least half the time for business purposes. If your business usage drops below 50 percent during some year before the ordinary depreciation period for this property ends, you will have to "give back" or recapture some of the amount you expensed.

To figure the recaptured amount, compare the amount you expensed, and the total amount you would have been entitled to deduct so far under the quickest depreciation method allowed for that type of property. If the amount you expensed was greater, the difference between the two amounts must be reported--and taxed--as ordinary income, not capital gains income.

The recapture is reported on IRS Form 4797, Sales of Business Property, in Part IV at the end of the second page. If the property was listed property, use Column B of Lines 33 through 35. If not, use Column A.

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