The IRS recently released the depreciation dollar limits for business vehicles placed in service in 2017. (IRS Revenue Procedure 2017-19, 3/24/17)
Alert: The new figures reflect a 50% “bonus depreciation” that is available for new vehicles being used specifically for business driving. This bonus depreciation break was preserved by the Protecting Americans from Tax Hikes Act of 2015.
Under the PATH Act, bonus depreciation will decline to 40% in 2018, 30% in 2019 and disappear completely for 2020 and thereafter.
Be aware of dollar limits for two categories of vehicles placed in service in 2017. One is for passenger autos and the second is for light trucks and vans. Both categories are subject to the “luxury car”that limit annual deductions to a specific maximum amount.
Big tax loophole: A vehicle with a gross vehicle weight rating (GVWR) over 6,000 pounds is exempt from the luxury car depreciation limitations. Many of the larger sport utility vehicles used by business drivers meet the GVWR requirement. 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.
Absent the increase available for bonus depreciation—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 vehicles placed in service in 2017.
Caveat: These amounts are based on 100% business use. In the real world, you probably use your business vehicle for personal driving at least part of the time. For instance, if you acquire a passenger auto this year and you use it 80% for business driving and 20% personally, the first-year deduction is limited to $8,928 (80% of $11,160).
Tip: For leased business vehicles, the luxury car rules are reflected in special “lease inclusion” tables published by the IRS.