Rick increased the business use of his car last year to 75 percent. For the prior two years since he put the car in service, he was only using it 40 percent for business. What adjustment does he need to make to his depreciation calculation method to reflect this increased business use?

When the business use of a vehicle changes to more than 50% in a subsequent year after being less than 50% in prior years, the taxpayer must compute depreciation as follows: 1. **For the current year**: The taxpayer must switch to the Modified Accelerated Cost Recovery System (MACRS) using the straight-line method over the remaining recovery period. The depreciation deduction is calculated based on the current year's higher business use percentage. 2. **For prior years**: The taxpayer must recapture excess depreciation had the vehicle been used more than 50% for business from the beginning. This is done by comparing the actual depreciation claimed with the amount that would have been allowable had the straight-line method been used since the car was placed in service. The excess depreciation previously claimed must be included in income in the current year. 3. **Going forward**: The taxpayer continues to use the straight-line MACRS method based on the remaining useful life of the vehicle and the business use percentage for each subsequent year. Rick should adjust his depreciation calculation for the current year to reflect the 75% business use and recapture any excess depreciation from the prior years when the business use was only 40%. It's important to note that the depreciation limits for passenger automobiles may also affect the amount of depreciation Rick can claim each year. He should consult the latest IRS guidelines or a tax professional to ensure compliance with the current tax laws and regulations.

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