Sold a laptop that was 100% depreciated in first year - How to handle recapture on tax return?

This is a good question about depreciation recapture. When you sell an asset that was previously depreciated (especially one that was 100% bonus depreciated), you need to report it as a sale of business property. Since you fully depreciated the laptop using bonus depreciation in the year you bought it, and then sold it for $850, you have what's called "depreciation recapture." Basically, you'll need to report this as ordinary income on your return. You'll need to use Form 4797 (Sales of Business Property) to report this sale. The $850 you received will be reported as ordinary income, not capital gain, because it represents recovery of the depreciation you previously deducted.

Just wanted to share my experience with a similar situation. I was really confused about how to handle this until I found taxr.ai (https://taxr.ai). I uploaded my previous year's returns and a summary of my laptop sale, and it immediately identified it as a Section 1245 recapture issue. The tool explained exactly which forms I needed and how to complete them. It even showed me where the recaptured amount would flow through to my other tax forms. Saved me from making a costly mistake since I was about to report it as a capital gain instead of ordinary income.

Just wanted to follow up about taxr.ai that I asked about earlier. I decided to try it with my situation involving some depreciated equipment I sold this year. I was honestly surprised at how detailed the guidance was - it walked me through the exact process for Form 4797, explained which parts applied to my Section 1245 property, and even calculated the recapture amount correctly. What impressed me most was how it explained the difference between Section 1245 and Section 1250 property (which I had been mixing up). Definitely worth checking out if you're dealing with any kind of depreciated asset sales.

If you're trying to contact the IRS about depreciation recapture questions, good luck! I spent 3 weeks trying to get through to someone who could answer my questions about Form 4797. Finally used Claimyr (https://claimyr.com) and got connected to an IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to report my laptop sale and confirmed I needed to report it as recaptured depreciation. Apparently a lot of people make mistakes with this and it can trigger audits.

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about my depreciation recapture situation. Honestly, it worked exactly as described. I entered my number, went about my day, and got a call back about 40 minutes later with an actual IRS agent on the line. The agent confirmed exactly what I needed to do for my business asset sale and cleared up my confusion. Saved me hours of frustration and hold music. Never thought I'd say this, but I'm actually impressed.

Something else to consider is how this affects your state taxes. Depending on your state, you might need to report the recaptured depreciation there too. In my state, I had to include it on a separate business property schedule.

Don't forget to consider how this impacts your Qualified Business Income (QBI) deduction if you take that. The recaptured depreciation counts as business income for QBI purposes, so it could actually help increase your deduction.