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15848: 4562 - Listed Property Type


Fed Returns Generally

Why is my depreciation on this vehicle less than what I expect?

 

In Drake Tax, assets that have a selection in the Listed Property Type droplist are subject to additional rules and limitations.

Listed Property is defined as any of the following:

  • Passenger automobiles,
  • Any other property used for transportation, unless it is an excepted vehicle (See Pub 946 Chapter V for excepted vehicle explanations),
  • Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment).
  • Computers and related peripheral equipment placed in service by you before January 1, 2018, unless used only at a regular business establishment and owned or leased by the person operating the establishment.

Deductions for listed property (other than certain leased property) are subject to the following special rules and limits.

  • Deduction for employees. If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee.
  • Business-use requirement. If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. You may also have to recapture (include in income) any excess depreciation claimed in previous years. A similar inclusion amount applies to certain leased property.
  • Passenger automobile limits and rules. Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period.

In Drake Tax, there are currently 6 different selections that can be made from the droplist:

Code V and E follow the same rules and limits on vehicles placed in service after December 31, 2006:

 Maximum Depreciation Deduction for Passenger Automobiles
 Date Placed In Service  1st Year  2nd Year  3rd Year  4th and Later Years
 2019 $18,1001 $16,100 $9,700 $5,760
 (Acquired after September 27, 2017)
 2019 $14,9001 $16,100 $9,700 $5,760
 (Acquired before September 28, 2017)
 2018 $18,0002 $16,000 $9,600 $5,760
 (Acquired after September 27, 2017)
 2018 $16,4002 $16,000 $9,600 $5,760
 (Acquired before September 28, 2017)
 2017 $11,1603 $5,100 $3,050 $1,875
 2016 $11,1603 $5,100 $3,050 $1,875
 2015 $11,1603 $5,100 $3,050 $1,875
 2014 $11,1603 $5,100 $3,050 $1,875
 2013 $11,1603 $5,100 $3,050 $1,875
 2012 $11,1603  $5,100  $3,050 $1,875

 If you elected NOT to claim any special depreciation allowance or the vehicle is NOT qualified property, the maximum depreciation deduction is $10,100.

2 If you elected NOT to claim any special depreciation allowance or the vehicle is NOT qualified property, the maximum deduction is $10,000.

If you elected NOT to claim any special depreciation allowance or the vehicle is NOT qualified property, the maximum deduction is $3,160.​

Note: If the business use percentage of the asset is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business use determined on an annual basis during the tax year.

Code T vehicles maximum deduction is slightly higher than passenger automobiles in 2017 and prior.

 Maximum Depreciation Deduction for Trucks and Vans
 Date Placed 
In Service
 1st Year  2nd Year  3rd Year 4th & Later Years
 2017  11,5601  5,700  3,450  2,075
 2016  11,5601  5,700  3,350  2,075
 2015  11,4602  5,600  3,350  1,975
 2014  11,4603  5,500  3,350  1,975
 2013  11,3604  5,400  3,250  1,975
 2012  11,3604  5,300  3,150  1,875

1 If you elected NOT to claim any special depreciation allowance or the vehicle is NOT qualified property, the maximum deduction is $10,000.
2 If you elected NOT to claim any special depreciation allowance or the vehicle is NOT qualified property, the maximum deduction is $3,560.
3 If you elected NOT to claim any special depreciation allowance or the vehicle is NOT qualified property, the maximum deduction is $3,460.
4 If you elected NOT to claim any special depreciation allowance or the vehicle is NOT qualified property, the maximum deduction is $3,360.

Code H is used for heavy sport utility vehicles (SUV) and certain other vehicles placed in service during the tax year. You cannot elect to expense more than $25,500 ($25,000 in 2018 and prior) of the cost when this code is selected, however, regular depreciation after the year placed in service is not limited.

Code N is used to mark a vehicle as a listed property that is not subject to any of the rules or limits of other vehicle types.

Code X is used for listed property other than vehicles such as computer and related peripheral equipment.

Note: The Tax Cuts and Jobs Act removed computers and peripheral equipment from the definition of listed property. This change applies to property placed in service after December 31, 2017. Refer to FS-2018-9 for more information.

For additional depreciation rules on earlier years, refer to Pub 946 Chapter V and 4562 Instructions.

A selection of any of the above codes in the listed property drop list will cause the asset to flow to Part V of the 4562.

For assets designated as a listed property type, the EXP method of depreciation should not be selected. In the 1040 package, you will get errors 5515 and 5623 (similar errors will appear in other return types).

 Error 5515:

INVALID DEPRECIATION METHOD: Form 4562 has listed property with a disallowed depreciation method. Per the Form 4562 instructions and IRS e-file requirements, only certain methods are allowed for Part V, Column G, Method/Convention. The following data entry changes must be made in order to e-file this return:

  1. Return to the 4562 screen.
  2. Change the method to the correct depreciation method applicable to the asset and used by the entity. DO NOT LEAVE BLANK.

For more information, see the IRS instructions for Form 4562, line 26, and Publication 946 - How to Depreciate Property.

Error 5623:

A method of "EXP" has been selected for one or more assets on the 4562 screen:

One of the following is true:
- The maximum amount of section 179 expense allowable for all assets ($510,000) has been exceeded on this return.
- The luxury vehicle depreciation limits have been exceeded on a particular vehicle.
- The amount in "179 expense allowed this year" doesn't match the cost.

NOTE: When the method is listed as "EXP", the override fields "179 expense elected this year" and "179 expense allowed this year" should remain blank. The program automatically expenses the entire cost, subject to the limits listed above.

Select another "Method" and "Life" for depreciation since the assets cannot be completely expensed using "EXP", or clear the incorrect override fields on the 4562 screens for these assets.

In order to see section 179 expense on a listed property asset, the amount of elected 179 will need to be manually entered on the 4562 depreciation detail screen, on the 179 expense elected this year line. 

If the elected amount entered is greater than the allowable limit for the asset, the software will automatically adjust the section 179 expense allowed for the asset.


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