Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

My question is regarding depreciation of a car for tax

hello my question is regarding...
hello my question is regarding depreciation of a car for tax deduction
-i know that cars acquired are depreciated over five years, as in a certain percentage of cars value can be claimed as a tax deduction over 5 years.my question is, is the percentage different for used cars ?? (since they already depreciated already)
or is still the same whether its new or used?i guess im asking if a bought a new 2018 car for 50k dollars and a used 2015 car, will the depreciation deduction amounts be the same?
Show More
Show Less
Ask Your Own Tax Question
Customer reply replied 1 month ago
this would be when using actual expense method as opposed to a mileage
Answered in 3 hours by:
6/24/2018
James Daloisio
James Daloisio, Tax Attorney
Category: Tax
Satisfied Customers: 870
Experience: 24 years of continuing education and experience.
Verified

Hi, my name is ***** ***** welcome to Just Answer.

The depreciation percentages don't change. The amount that is taken as depreciation is dependent upon the car's "basis," which essentially is it's purchase price, subject to statutory limits. And in any event, vehicles are classified as "listed property," which means in order to take any first year expensing deduction (the Section 179 deduction), your business use must exceed 50%.

Automobiles are subject to what is known as the "Section 280F" limitation; there is a "special depreciation allowance" for new property placed in service during the tax year that allows you to claim either 50% of the cost or 100% of the cost, assuming 100% business use. But for vehicles, the special allowance is calculated by adding a specified dollar amount to the allowable depreciation percentage for the year.

As an example, let's say you buy your car for $50,000 and you use it 100% for business. Subject to a few exceptions, you would choose the "half-year convention" which allows 20% the first year; but your regular depreciation deduction is limited to $3,160. For 2017 you could add special depreciation up to $8,000 for a total of $11,160. The 2d year limit for this property would be $5,100; 3d year limit $3,050; and all subsequent years, $1,875. In 2018 the maximum allowable figure for special depreciation is reduced to $6,400, and in 2019 it is reduced to $4,800.

Another consideration is this: if you think you'd want to switch to taking the standard mileage rate in future years, you can't if you take the special depreciation allowance for the first year. Otherwise, if this is your plan, then you'd have to forego the special depreciation and use the straight line method of depreciation rather than the MACRS system (Modified Accelerated Cost Recovery System). A straight line method takes 10% the first year, then 20% the next four years, and 10% in the 6th year.

Passenger autos rated at more than 6,000 pounds unloaded gross vehicle weight, or trucks and vans rated at more than 6,000 pounds loaded gross vehicle weight, are not subject to the 280F limits. So if you purchased a Chevy Silverado 1500 for $30,000, you could take the entire amount for the first year assuming 100% business use. Lesser use percentage would have to be more than 50% to claim this allowance.

SUV's are subject to a maximum deduction of $25,000 assuming they are exempt from 280F.

If you purchased a used vehicle, you would not be eligible to take special depreciation. Your first year depreciation is 20% subject to a maximum of $3,160, so if the basis of the used car was $15,000 you would take 20%, or $3,000; if the basis of the car was $16,000, 20% would be $3,200, which is $40 over the limit, so you'd just take the allowable $3,160.

Hope that helped. Please don't forget to rate this answer. You may always return here with follow up questions on this topic at no additional charge. Thank you for using Just Answer.

Ask Your Own Tax Question
Customer reply replied 1 month ago
i think this used to be true, but i think it changed now for 2018 because i saw this link, would you mind checking it out , on this link used vehicles are now allowed to take the bonus depreciation.
https://www.marketwatch.com/story/use-your-car-for-your-small-business-the-new-tax-law-is-good-news-for-you-2018-03-06

Thank you for the link! I have the TCJA sitting here on my desk...I'll find that section and give you the official version. The information I sent you was as of tax year 2017. Be back soon....

Ask Your Own Tax Question

Well....

Section 280F was amended to increase the limits:

(1)Depreciation

(A)Limitation

The amount of the depreciation deduction for any taxable year for any passenger automobile shall not exceed—

(i) $10,000 for the 1st taxable year in the recovery period,

(ii) $16,000 for the 2nd taxable year in the recovery period,

(iii) $9,600 for the 3rd taxable year in the recovery period, and

(iv) $5,760 for each succeeding taxable year in the recovery period.

Assuming 100% business use, the maximum special depreciation in year 1 is $8,000, giving a total possible depreciation amount of $18,000.00, up from the $11,160 from 2017.

Second, third, and subsequent years' deprecation limits are also increased:

$16,000 for the second year,

$ 9,600 for the third year, and

$ 5,760 for each subsequent year in the recovery period.

And yes: used vehicles will now qualify for bonus depreciation in the year they're purchased as long as this vehicle hasn't been previously used in your business. I've been trying to find the discussions of this portion of the legislation to figure out what they mean by "not previously used in the business," and it was intended to eliminate the recycling of autos in a business that'd been previously purchased used and were ineligible for the special depreciation.

So the answer to your question is: 1) No. The percentage is not different for used cars;

2) Yes, the deduction amounts will be the same assuming the same purchase price and applicability of Section 280F based on vehicle weight.

So you can purchase a used >6,000 lb. vehicle at the same price you'd pay for a new <6,000 lb. vehicle. You'd get to expense the full amount of the purchase price for the used, >6,000 lb. vehicle rather than the $18,000 for the new, <6,000 lb. vehicle.

Sorry for the misinformation; no excuses, but I remember now why this is still sitting on my desk. I'm still waiting for the GPO to update the treasure regs. Tax code is updated, but Code of Federal Regulations seems to be lagging behind. This particular issue is governed by 26 C.F.R. 1.168k-1.

James Daloisio
James Daloisio, Tax Attorney
Category: Tax
Satisfied Customers: 870
Experience: 24 years of continuing education and experience.
Verified
James Daloisio and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 1 month ago
a little busy now but will read your response later. thank you for your checking this out . have a good day
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask James Daloisio Your Own Question
James Daloisio
James Daloisio
James Daloisio, Tax Attorney
Category: Tax
Satisfied Customers: 870
870 Satisfied Customers
Experience: 24 years of continuing education and experience.

James Daloisio is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
My question is regarding depreciation for a car/truck using
my question is regarding depreciation for a car/truck using an actual expense method. My business is a single member LLC.my question is do i absolutely have to have a mileage log ?? my car is 100% use… read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,674 satisfied customers
My question is regarding using car depreciation as a tax
hello my question is regarding using car depreciation as a tax deduction using actual expense methodlsay i bought a car this year , used it 100 % for business, took the actual expense depreciation and… read more
Alexander Efros
Alexander Efros
Masters of Business Administration (MBA)
126 satisfied customers
I have a 20 year old Arizona LLC and have never depreciated
I have a 20 year old Arizona LLC and have never depreciated a vehicle throgh the business. Under section 13202 of the TCJA it seems liek if i buy a new Tesla for:Purchase $84,000Federal (7,500)Bonus D… read more
Dr. Fiona Chen
Dr. Fiona Chen
President
Ph.D.
1,435 satisfied customers
I opened a business for rental cars, my question is do i
my question is do i need to keep track on the mileage on the rental cars … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
This is for a tax question. What method do I use for
This is for a tax question.What method do I use for depreciation of an auto and for how many years?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
As a sole propriter. Can i purcahse a car in my name and
can i purcahse a car in my name and deduct it on my tax treturn or do i need to estanblish an LLc first? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
For my business, if I kept my gas receipts, but I did not
Hello, for my business, if I kept my gas receipts, but I did not keep track of my mileage for my shop vehicle, I can't deduct anything, correct? I use it for personal use too.… read more
abci168
abci168
Principal
27 satisfied customers
This has to do with the Depreciation deduction for my
This has to do with the Depreciation deduction for my spouses business us of our car (we file jointly)... We purchased a new car in late Nov 2015, and she started using it for her business but only lo… read more
Shan-Nel Simmons
Shan-Nel Simmons
Tax Professional/Owner
Master\u0027s Degree
43 satisfied customers
We have a small business and would like to purchase a new
we have a small business and would like to purchase a new SUV gross vehicle weight over 6000 lbs. we would use it 90% for business. If we buy the vehicle in December 2015 vs. January 2016, would the d… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I bought a new-to-me used car in October 2014. I use the car
I bought a new-to-me used car in October 2014. I use the car 60% purposes - I own an LLC. Is there any connection between how I deduct the purchase of the car and whether I take the mileage or actual … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
can I claim 2 vehicles on my tax return? The first one was
can I claim 2 vehicles on my tax return? The first one was used in my business Jan - Dec 2013 I want to use mileage deduction. The second one I purchased in Sept 2013, I want to depreciate (179) deduc… read more
Megan C
Megan C
Certified Public Accountant (CPA)
Master's Degree
8,655 satisfied customers
Im in CA and about to buy a car and am weighing whether to
I'm in CA and about to buy a car and am weighing whether to lease or buy. The car will be bought or leased through the company I own (I have other cars i can claim for personal use). if i lease, i kno… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
I am a w-2 employee and I have a part time 1099 job as a driving
I am a w-2 employee and I have a part time 1099 job as a driving instructor. I am getting a car to use for this position. i think that the payments themselves are not deductible, but is there more of … read more
BK-CPA
BK-CPA
Bachelor's Degree
687 satisfied customers
I am a small buisness owner sole propriator construction .
I am a small buisness owner sole propriator construction . I bought a new truck that I paid cash for on 12/31/09 (refinanced the house) The price of the truck was $34,500. the milage that I used it in… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
Hello- I have a question concerning taking car and truck
Hello- I have a question concerning taking car and truck deductions in reference to filing an amended return on my taxes. I bought a new truck in 2007 for my business ( I'm self employed in a sole pro… read more
Merlo
Merlo
Tax Consultant
558 satisfied customers
I am leasing the car I use for business and am writing off ...
I am leasing the car I use for business and am writing off a portion of the lease. At the end of the lease, I would like to purchase the leased car and refinance it for 5 years. Can I treat the purcha… read more
WebTaxMan
WebTaxMan
Tax Accountant
Bachelor's Degree
576 satisfied customers
can i write off my car if i have two and one is used ...
can i write off my car if i have two and one is used for a home business. IE I have a oil consulting business and I use my new car for transportation, can I write off my car payments if I use it prima… read more
GARY ELLIS
GARY ELLIS
Tax professional
Bachelor Degree
74 satisfied customers
I am the sole owner and employee of an S-corp services ...
I am the sole owner and employee of an S-corp services business. I do executive search for clients nationwide. What are the parameters for me to purchase a "company car" through my business when the m… read more
RD
RD
Self Employed
Master's Degree
1,164 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x