Many people claim depreciation on their business vehicles. This is an excellent way to offset some of the expenses of maintaining a vehicle that is needed for work reasons. However, the IRS has recently announced new 2016 Depreciation Limits that could make the process more complicated.
IRS 2016 Depreciation Limits
The Protecting Americans from Tax Hikes Act of 2015 was extended to 2016 under a congressional act known as the Consolidated Appropriations Act. This gives people who write off vehicle depreciation an additional tax break. Because of confusion over this change, the IRS has released Revenue Procedure 2016-23 to clarify the new limits.
What Can Vehicle Owners Claim as Depreciation?
First and foremost, there are changes in depreciation limitations. This means that you can write off a slightly higher amount. In addition, there were revised limitations for people who lease vehicles as well as those who purchased vehicles for use in a business. Section 169(k) lists who these new IRS 2016 depreciation limits apply to.
For most people, these changes will mean an increased write off. A bonus 50% depreciation has been extended by the new act, so up to $11,160 of the depreciation of passenger automobiles can be claimed. Trucks and vans are eligible for an even higher credit, at up to $11,460. This is an $8000 increase, which is quite significant and can make a sizeable difference in one’s tax liability. If the bonus depreciation does not apply to your situation, your limits will be $8000 less.
Leased Vehicles and Depreciation
Lessees also will see a net benefit under this newly extended law. However, there are no set limits but rather a table. The Section 280F(c) contains this table, with updated amounts allowed as depreciation. This will apply to all vehicles, including passenger autos, trucks, and vans, that are leased and placed in service in 2016.
The constantly changing laws and schedules can be confusing. If you have any questions about which depreciation schedules apply to your situation, call Gary Kaplan, CPA today.
