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Modified Accelerated Cost Recovery System (MACRS), Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8
Modified Accelerated Cost Recovery System (MACRS), Listed Property, Limitation on Depreciation of Luxury Automobiles
(LO 8.2, 8.4, 8.5)
On September 14, 2019, Jay purchased a passenger automobile that is used 75 percent in his accounting business. The automobile has a basis for depreciation purposes of $40,000, and Jay uses the accelerated method under MACRS. Jay does not elect to expense under section 179.
Click here to access the depreciation table and click here to access the annual automobile depreciation limitations.
Calculate Jay's depreciation deduction for 2019 assuming bonus depreciation.
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Expert Solution
Computation of Jay's depreciation deduction for 2019 assuming bonus depreciation:
Depreciation years as per MACRS for automobiles is 5 years.
Normal Depreciation for 2019 = $ 40,000 * 20% = $ 8,000
Bonus depreciation for 2019 (100% but capped at 18100 total deduction) = $10,100
Total Depreciation for 100% Use = $18,100
Actual Business Use 75%.
Jay's Depreciation deduction for 2019 = $ 18,100 * 75% = $ 13,575
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