Changes to Luxury Auto Depreciation for Business Vehicles

The new tax law generally changes depreciation limits for business passenger vehicles placed in service after September 27, 2017. If a taxpayer does not claim bonus depreciation, the greatest allowable depreciation deduction is: $10,000 for the first year, $16,000 for the second year, $9,600 for the third year and $5,760 for each later tax year in recovery period. If a taxpayer claims 100-percent bonus depreciation the greatest first year allowable depreciation deduction would increase to $18,000, the limits for the following years remain the same.

The rules described above are for luxury passenger automobiles and do not include sport utility vehicles, trucks and vans that have a gross vehicle weight over 6,000 pounds. These vehicles are eligible for 100% bonus depreciation deductions.

Please keep in mind that all vehicles must qualify as business vehicles and cannot be acquired from a related party.

As with all tax laws certain exceptions apply and new guidance is expected to be issued by the IRS on the historic new tax law. Please feel free to contact us with any questions.