How do I know how to recompute my prior year depreciation?
In order to figure out how much you could have deducted using the straight-line depreciation method you'll need to take the asset's life and divide the depreciation that could have been taken evenly.
For example, if I have a 5-year asset that was placed in service in 2023 with a $100 cost basis, then each year the depreciation would be $100 / 5 = $20. However, the IRS doesn't let you take the full amount of depreciation the first year. Assuming the asset was depreciated using the half year convention (meaning you only get half a year of depreciation the first year) the recomputed prior depreciation for this asset would be $10 + $20 = $30. Attach a statement to your return showing the computation of recapture for each asset.
For example, if I have a 5-year asset that was placed in service in 2023 with a $100 cost basis, then each year the depreciation would be $100 / 5 = $20. However, the IRS doesn't let you take the full amount of depreciation the first year. Assuming the asset was depreciated using the half year convention (meaning you only get half a year of depreciation the first year) the recomputed prior depreciation for this asset would be $10 + $20 = $30. Attach a statement to your return showing the computation of recapture for each asset.
