Tax Q: Stop Depreciating/Tracking Bus Assets when retired?

[Zona]

DH worked as an IT consultant for many years using a pass-through LLC, kind of like a sole proprietor. He worked remotely for most clients. During that time, we had some assets for the business, such as laptops, home office furniture (a desk/chair), software, and because we claimed a home office deduction there was a small percentage of our primary residence building cost also on the depreciation schedule.

In 2018, DH took a full-time W-2 job and stopped taking consulting contracts for good. At that time, our (expensive) accountant put all assets as "out of service" on the Federal Asset Report that he includes with our taxes. Then DH fully retired in Fall 2021. Our accountant still included the Federal Asset Report pages in our copy of the return for tax year 2021 with all assets marked as "out of service" even though DH had not done consulting work at all since 2018.

Reading this forum has given me confidence to hopefully simplify and self-file our taxes for 2022 and beyond. (Our accountant still charges > $600 annually even though our situation is much simpler now). So this is my first year trying to use Turbo Tax -- our only income is Dividends, Interest, Capital Gains, and a Roth Conversion. I have already filled out our return in TT for this year (haven't e-filed yet) and the tax numbers look accurate. But since we don't run the consulting business anymore, TT didn't provide me a way to continue tracking the assets, if I even need to do that anymore. Is it okay to just ignore the old assets and not report them going forward? They are either past their useful life, or we are just going to keep them (a laptop, home office furniture, the office is attached to the house we live in, etc). I don't really understand depreciation -- will the IRS expect me to keep reporting on these old unused assets now that we are no longer working?

Apologies if this is too specific or complicated to be answered here; I will happily make an appt and pay H&R Block for their answer, but I hoped someone here might've had the same situation and know the answer. Thanks in advance!

[OldShooter]

Quote:

Originally Posted by Zona ... will the IRS expect me to keep reporting on these old unused assets now that we are no longer working? ...

If they do, they will tell you. I never lose sleep over decisions like this; small stuff and at worst an honest error by someone who is not a tax expert.

CPA's get upset with me when make a decision or give someone advice based on the very, very low probability that a simple individual return will get audited. But that's the fact. IMO your risk in making this decision is near zero.

[Sunset]

I'm not an accountant, but do depreciate my rentals. I'll toss out my guess to get the conversation going:

I think for all the unattached stuff (chair, computer, desk) you could claim to have disposed of them for the business and claim got what each is worth in the remaining depreciation for them value, take the full depreciation to balance off the residual value, then that ends the tracking of them, and no tax effect .


The house depreciation is more special (I think) and may have to be claimed as recapture of depreciation when you sell the house. This link talks about it a bit. Seems like its a confusing changing issue. So just keep the paperwork for when that time comes in your files.

https://www.thebalancemoney.com/tax-...ffices-1798786

[Zona]

Thanks for the answers so far. I did try using my best google-fu to get an IRS-worthy answer. Most of the answers deal with how to report depreciation, not how to *stop* reporting it. I had seen that Balance article you linked, Sunset, which I'll keep bookmarked for the future. I had wondered if there might be a recapture process if we wanted to sell the house. We'll keep our records, in case. We don't plan on selling our house anytime soon and we haven't claimed any additional depreciation deductions since 2018, so even if we did end up selling before the usable life of the house is over, I can't imagine the recapture would be too much.

Thanks for your answer, OldShooter. You're right -- I'm just a layperson and I do my best to pay taxes above-board (I'm even reporting that $150 Fidelity bonus despite Fidelity not including it on my 1099 ). So if leaving this paper trail off this return is the wrong thing to do and I end up audited I can definitely say it was an honest mistake, having made an honest effort to find the answer. Thanks again!

[cathy63]

The depreciation on the house matters. You don't have to keep reporting it, but you do have to recapture it if you ever sell it. The details on that are in IRS Pub 523. Actually, if you look at what the CPA gave you for the past few years, the depreciation report is probably just a worksheet or a printout from his software rather than a form that was filed with your tax return.

For the business assets, if you sell any of them you may have a capital gain. You'd have to calculate their adjusted basis by subtracting the total depreciation taken from their purchase prices; then subtract that adjusted basis from the sales price to calculate the gain or loss. A gain is taxed, a loss is not deductible since you're now using them as personal property.

If you discard the depreciated assets or turn them in for recycling, that's not reflected on your tax return. In that case you're treating them as worthless.

If you donate them to charity, then ideally the fair market value would be less than the adjusted basis. In that case you can take a charitable deduction for their fair market value. If they are worth more than the adjusted basis, then you should technically do a calculation to recapture some of the depreciation. It sounds like that would be a really small amount if it were even applicable. If it were me, I'd just keep the charitable deduction small enough not to catch the IRS' attention.

[OldShooter]

@Zona, sleep well. You have nothing to worry about.

[Zona]

Quote:

Originally Posted by cathy63 The depreciation on the house matters. You don't have to keep reporting it, but you do have to recapture it if you ever sell it. The details on that are in IRS Pub 523. Actually, if you look at what the CPA gave you for the past few years, the depreciation report is probably just a worksheet or a printout from his software rather than a form that was filed with your tax return.

Thank you Cathy63 - I had a chance to check last year's return this morning and you are right - it is just a report from our CPA's software, not an actual "Statement" included with the 1040. I appreciate your response & advice above, especially knowing you have so much experience in the field. I will make sure that we don't sell anything at a profit -- we'll probably just use everything (laptops/tech) until it breaks or is obsolete, then recycle or donate it. For the house depreciation recapture, I will keep these records until we decide to sell, and make sure to hire a CPA to do the tax return to properly account for the depreciation in the sale. Thanks again for your time & reassurances!