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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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How do I properly depreciate my car for my business? I used

Customer Question

How do I properly depreciate my car for my business? I used an accountant last year and he depreciated my car starting for tax year 2008. I'm doing my own taxes this year and wanted to remain consistant. Do I just depreciate the same amount?
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello JA Customer,

 

If you started your business mid year, then your accountant may not have claimed a full year of depreciation, as you would want to do this year.

 

Your tax person should have filled out a Form 4562 for the depreciation. Your car should be listed in Part V of that form. In column d it would show the cost or basis that is being used for depreciation. Column f would show the recovery period, which should be 5 years. You would want to divide the basis by 5 and that is the amount you claim as annual depreciation for a full year.

 

 

Thank you JA Customer

 

 

Customer: replied 4 years ago.

The problem I have is that on form 4562 section V, my accountant only entered information for columns a, b, and c. He didn't enter a cost basis, recovery period or a method. The cost amount he used in section one of form 4562 was $216. I don't have any idea how he got that number but again, I want to keep things consistant.

Expert:  Merlo replied 4 years ago.

Hello again JA Customer,

 

Unfortunately without that information entered there is no way I could advise you of what he used as the cost basis. But basically this is what you need to do.

 

Cars are depreciated over a 5 year period of time. Your depreciation also depends on the percentage you actually use the car for business. Your cost basis is what you paid for the car. So just say for example you paid $10,000 for the car. Your depreciation each year for a full year would be $2,000 a year for the next 5 years -- assuming you use the car 100% for business. If your business usage of the car is only 50% then you would only claim $1,000 a year.

 

I would suggest that you use the cost you paid for the car as your basis and depreciate that amount by 5 years. And then multiply that yearly amount by the same percentage as you actually use the car for business.

 

 

Thank you JA Customer

 

 

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