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Old 08-10-2008, 01:48 PM
 
Location: San Jose, CA
7,678 posts, read 25,028,199 times
Reputation: 3528

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I have a problem car. I was using it for business, but that abruptly ended when it died after just two months. It would be much too expensive to fix, so it's now sitting in the parking lot slowly rusting to nothing. I was reading about how to depreciate it, but the typical schedules say that if you dispose of it the same year, you can't depreciate it.

I've been reading the IRS tax publications. The way out of this wreck seems to be to take a Sec 179, under which you can depreciate the full value of any business property, up to $125,000 or your taxable income before deductions. Then I can't claim a loss when I give it to some mechanically minded student as a project car, but at least I'd be able to claim depreciation on what I paid for it, as well as the money I sunk into it for maintenance and repairs before its untimely demise. Since I would recover no money from its sale, I would not have to recapture the depreciation.

Am I on the right track here?
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Old 08-10-2008, 03:23 PM
 
1,640 posts, read 4,144,004 times
Reputation: 1000
Section 179 would allow you to expense the entire value of the car in the first year. This will have the same tax effect as claiming a loss on the car, which would essentially be disposing of it with 0.00 salvage value.

Same result either way.
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Old 08-10-2008, 08:32 PM
 
Location: San Jose, CA
7,678 posts, read 25,028,199 times
Reputation: 3528
Depreciation and Section 179 Expense (http://www.irs.gov/formspubs/article/0,,id=177054,00.html - broken link)

It seems I can still do this.. this is the article that confused me at first, now I can see that it's fine, I just have to depreciate the max amount allowed this year and take the rest next year..
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