Question

Linda bought a passenger car on February 15, 2017 that she uses 45 percent of the time in her business and 55 percent of the time for personal use. The car cost $48000 and no expensing or bonus depreciation is allowable for the car. Compute Linda's maximum allowable depreciation deduction for the car in 2017.

Answer 1

Answer: Any expenditure incurred for the business purpose is only allowed as deduction from the Business profit of Linda. The expenditure incurred for the personal use is not allowed as deduction from Linda's business profit. Such expenditure can be fuel expense, repair & maintenance expense, insurance of the car, are allowed as deducution. Apart from these expenditures depreciation is the most important allowance while computing the income from business.

The extent to which the vehicle is used for the personal use should be proportionately disallowed.

For 2018, business tax purpose, Section 179 of IRS Code allowa $1 million maximum on individual new and used equipment purchased.

Vehicles used in your businesses qualify - but certain passenger vehicles have a total depreciation deduction limitation of $11,060, while other vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes qualify for full Section 179 deduction. As, Linda uses 55% of the car for personal use, which is much more than the minimal amount.

Therefore, the maximum amount of depreciation that can be claimed as deduction is as under:-

Maximum Depreciation allowable = $11,060.00