You may depreciate the new $7,500 asset. The total depreciation expense may not exceed the Maximum Depreciation Deduction for 2024 which is $20,400. The depreciation of the improvement plus the depreciation reported for the original asset must not exceed the Maximum Depreciation Deduction for 2024.
IRS Publication 563 Travel, Gift, and Car Expenses, page 27 states:
Improvements
A major improvement to a car is treated as a new item of 5-year recovery property. It is treated as placed in service in the year the improvement is made. It doesn’t matter how old the car is when the improvement is added. Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) can’t be more than the depreciation limit that applies for that year.
The Maximum Depreciation Deduction chart is found at the top of page 29.
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