2021 IRS Changes for Car and Truck Depreciation Limits

Every year the IRS issues an inflation-adjusted update to the depreciation limits for passenger automobiles placed in service for that year. These limits are updated for the inflation according to the automobile component of the chained consumer price index. Here are the changes made for the 2021 tax year:

            For vehicles in which bonus first-year deprecation applies, the depreciation limit is $18,200 for the first tax year, $16,400 for the second tax year $9,800 for the third tax year; and $5,860 for each following year. Each year the limit increased $100 from 2020 except for the second-year limit which increased $300 from 2020.

            For vehicles in which bonus first-year deprecation does not apply, the depreciation limit is $10,200 for the first tax year; $16,400 for the second tax year; $9,800 for the third tax year; and $5,860 for each following year. These changes are shown under Sec. 280F(d)(7).

            Deductions on the cost of leasing automobiles is limited under Sec. 280F(c) where the limitation is calculated using the formula and tables directed under Regs. Sec. 1.280F-7.

If you would like to learn more or to set up a consultation call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730.

The above information is of a general nature only and should not be relied upon for specific situations.