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Business Vehicle Tax Depreciation Changes
The IRS recently released the depreciation dollar limits for business vehicles placed in service in 2017.
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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.
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.