Reminder about Auto Deductions

The new tax law that was enacted on December 22, 2017 greatly increased the allowable deduction for passenger automobiles that are used for business purposes in 2018 and later years.  Practitioners should alert their clients about these greater deductions and use the higher limits for tax projections for the 2018 year.

The limit for depreciation for vehicles placed in service in 2018 is $10,000 for the first year of the vehicle’s service life ($18,000 for bonus-eligible vehicles).  The limit for the second year of the vehicle’s service life is $16,000; it is $9,600 for the third year, and $5,760 for later years.  These limits apply for both normal passenger automobiles as well as light trucks and vans.

Vehicles placed in service in earlier years are still subject to the lower limits that were in effect when the vehicle was placed in service.  For example, normal passenger automobiles (i.e., passenger automobiles other than light trucks and vans) placed in service in 2017 remain subject to a $5,100 limit for the second year of the vehicle’s service life, $3,050 for the third year, and $1,875 for later years.