In accordance with the new tax laws, depreciation limits have changed considerably, specifically for luxury cars

Under the old tax law, a base of approximately $15,000 was the maximum allowed used for annual depreciation for a passenger vehicle. The new law takes into account the rising cost of purchasing a vehicle and has adjusted the depreciation limits accordingly. The new depreciation limit is closer to a vehicle cost base $40,000 now (see chart below). The vehicles considered for this law are "luxury vehicles", which include any passenger vehicle, truck, or sports utility vehicle  that is meant to be used on public roads, or any vehicle rated as having a gross weight of less than 6,000 pounds. 

 

TCJA (New Law 2018)

Old Law 2017
Year 1 $10,000

$3,160

Year 2 $16,000 $5,100
Year 3 $9,600 $3,050
Year 4 & subsequent years until fully depreciated $5,760 $1,875

    

What does this mean for you? The maxiumum depreciation allowance for the first year you own your new or used passenger vehicle is $10,000, plus up to an additional $8,000 in bonus depreciation. The limit is higher for SUVs with loaded vehicle weights over 6,000 pounds. Meaning, if you buy an SUV or truck and use it 100% for business, the vehicle will be 100 percent deductible for 2018

The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.

Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730 as required to set up an appointment.