Business Vehicle Tax Depreciation Changes

The IRS recently released the depreciation dollar limits for business vehicles placed in service in 2017.

The 2017 bonus depreciation for new vehicles used specifically for business driving is 50%.  This bonus depreciation will decline to 40% in 2018; 30% in 2019; and disappear completely in 2020 and thereafter. 

Passenger autos and light trucks & vans put into service in 2017 are subject to the “luxury car” depreciation rules that limit annual deductions to a specific maximum amount.

Loophole:  A vehicle with a gross vehicle weight rating over 6,000 pounds (which includes many larger sport utility vehicles) is exempt from the luxury car depreciation limitations.  In this case, you’re entitled to a first-year write-off of up to $25,000 for a vehicle that is placed in service in 2017. 

Without the increase available for bonus deprecation – which effectively adds $8,000 to the first-year deduction – the depreciation limits have barely budged, if at all, in recent years.

See the chart below for the exact figures for passenger autos and light trucks & vans placed in service in 2017.

Automobiles: 
2017 - $11,160 (based on 50% bonus depreciation)
2018 - $5,100
2019 - $3,050
2020 & after - $1,875
 
Light Trucks & Vans:
2017 - $11,560 (based on 50% bonus depreciation)
2018 - $5,700
2019 - $3,450
2020 & after - $2,075
 
These amounts are based on 100% business use.  Therefore, if you use your new vehicle for business 80% of the time and 20% for personal use, your first-year deduction is limited to $8928 (80% of $11,160).
 
Leased business vehicles have a special “lease inclusion” table published by the IRS.
 
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