Depreciation Recovery Calculator

This calculator works out depreciation recovery income, the depreciation that is clawed back and taxed when you sell a business asset for more than its depreciated value. When a business claims depreciation on an asset, it reduces taxable income each year, lowering the asset's book value, called the adjusted tax value. If you later sell that asset for more than its adjusted tax value, it turns out you claimed too much depreciation, because the asset did not lose as much value as the deductions assumed. Inland Revenue recovers the over-claimed depreciation by taxing the difference as income in the year of sale, known as depreciation recovery. It is a common surprise for businesses and rental property owners selling assets like vehicles, equipment or chattels. This tool estimates it. You enter the asset's original cost, the total depreciation claimed on it, and the sale price, and the calculator works out the adjusted tax value, the taxable depreciation recovery, and any portion of the sale above the original cost, which is generally a non-taxable capital gain rather than recovery. The results update as you type. Use it to anticipate the tax on selling a depreciated asset, to plan a sale, or to understand the clawback. The logic is that the recovery is the sale price, capped at the original cost, minus the adjusted tax value, when the sale exceeds that value. Recovery only arises when you sell above the adjusted tax value; sell at or below it and there is no recovery, and you may even have a deductible loss. Any amount received above the original cost is not depreciation recovery, since you cannot recover more depreciation than you claimed. This is an estimate of the recovery income; confirm the tax treatment with an accountant.

Adjusted tax value = cost - depreciation claimed. Recovery = min(sale, cost) - adjusted value, if positive. Sale above original cost is generally a non-taxable capital amount. An estimate.