Part 2 Depreciation, Basis and Dispositions question: Dan's business car

Part 2Depreciation, Basis and Dispositions

Dan's business car was used 70% for business in 2024 but only 40% in 2025. What happens in 2025?

A He may keep using MACRS because use was over 50% in 2024
B He must recapture all depreciation ever claimed
C He simply claims 40% of the regular MACRS deduction for 2025
D Switch to ADS and recapture the excess depreciation

Show the answer and explanation

Answer: D. Switch to ADS and recapture the excess depreciation

Listed property must be used more than 50% for qualified business use to use MACRS and section 179. When business use drops to 50% or less, the taxpayer must use ADS straight line from then on and include in income the excess of depreciation claimed (including section 179 and bonus) over what ADS would have allowed for prior years. Source: IRC 280F(b); Pub. 946 (2025), chapter 5, Recapture of Excess Depreciation. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Continuing accelerated depreciation after business use falls to 50% or less.

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Related Part 2 practice questions

In 2025 a calendar-year business placed in service $4,150,000 of machinery qualifying for section 179, its only section 179 property. What is its maximum section 179 deduction before the business income limit?A calendar-year business placed 7-year property in service in 2025: $20,000 in February and $80,000 in November. It elected out of bonus and section 179. What is its 2025 MACRS depreciation?A calendar-year corporation formed in 2024 wants S status starting January 1, 2025. March 15, 2025 fell on a Saturday. By what date must it have filed Form 2553 for the election to be timely?

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Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.