Today TaxMama hears from Mary in Oregon, who tells us. “I have run a day care business in my home for many years and have taken business use of home and depreciation. I am now shutting down the business; but I am not selling my house or any of the depreciated assets. When do I have to recapture the depreciation? Is it only when I sell the house? Or do I need to take it on my Schedule C when I close the doors and finally relax?”
Dear Mary,
Many years ago, I used to help UCLA and USC students find part-time jobs. The girls used to come in and say, “I want to work with children.” So we’d place them in day care jobs or schools. Generally, after one or two days, they’d come back screaming, and beg us to get them out of there. The reality of working with many children is much more stressful than the blissful concept.
I know how hard you must have worked all these years – even if you loved every child. You certainly deserve to relax!
And I have good news for you – at least about the house. When you sell the house, you will need to take into account the depreciation you’ve taken. If you never sell the house, forget it. Even your heirs won’t need to be concerned.
As to the business assets? If you used Sec 179 depreciation to take the deduction all at once, you will have to recapture that on this year’s Schedule C and Form 4562 – the Depreciation schedule. If you didn’t, and you haven’t sold the assets, there’s really nothing you must do. Unfortunately, there is no box on Schedule C to let IRS know you’ve closed your business. https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
And remember, you can find answers to all kinds of questions about closing a business and other tax issues, free. Where? Where else? At TaxMama.com.
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