For both new and used vehicles that are acquired and placed in service after 12/31/17 and...

For both new and used vehicles that are acquired and placed in service after 12/31/17 and used over 50% for business, the TCJA has which of the following impacts?

A) Dramatically increases the luxury auto depreciation limitations.

B) Repeals the luxury auto depreciation limitations.

C) Increase the maximim first year luxury auto depreciation limitation to $25,000.

D) Eliminates any additional luxury auto depreciation allowance for fisrt year bonus depreciation.

Expert Solution

A. Dramatically increases the luxury auto depreciation limitations.

Explanation:

For luxury vehicles which have been acquired and placed in service after 2017 and used for over 50% in Business, the person can claim $18,000 of luxury auto depreciation for the first-year. This $18,000 depreciation includes Bonus Depreciation of $8,000. Further, depreciation limits for further years have been increased from earlier limits i.e. for year 2, depreciation has been increased to 32% from year 2018 against $5,100 earlier. For year 3, 19.2% from year 2018 against $3,050 earlier. For year 4 & 5, 11.52% from year 2018 against $1,875 earlier.

During 2017 or prior years, the luxury auto depreciation for new vehicle for the first year was limited to $11,160 (including bonus depreciation of $8,000). For used vehicles, there was no bonus depreciation available and hence, first year depreciation was only $3,160.

Thus, there has been an increase in depreciation limitation for luxury auto.

ekkarill92 answered 10 months ago

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