Good day. I purchased a new car during 2023 (approx $81,000) expecting that depreciation would be at high levels for the five years. My first year 179/bonus depreciation for tax year 2023 (with 86% business use) was $17,691. I'm working on 2024 Turbotax now and it indicates depreciation for 2024 (with 85% business use) would be $3,375. Much lower than I expected. Am I or TT doing something wrong? Thank you.
No, you're not doing anything wrong. Since you claimed the Section 179 deduction and special "bonus" depreciation the first year you used this vehicle for your business, the remaining balance is depreciated over the useful life of the vehicle.
If you're using TurboTax Desktop, you can follow the depreciation calculations on the Car & Truck Worksheet for this vehicle under Part VI. Access this worksheet using Forms Mode.
To calculate the depreciation for each year, multiply your remaining basis by the percentages below.
Depreciable basis = purchase price less Section 179 less Special Depreciation.
As you have noted, the actual depreciation expense is less if your business use is below 100%.
For a vehicle placed in service in 2023, here is a list of the percentages applied to the remaining basis each year:
Year 1 - 20.00%
Year 2 - 32.00%
Year 3 - 19.20%
Year 4 - 11.52%
Year 5 - 11.52%
Year 6 - 5.76%
The depreciation deduction is further limited for listed property (which includes passenger automobiles). The listed property maximums are as follows:
Year 1 - $20.400
Year 2 - $19,500
Year 3 - $11,700
Year 4 and later - $6,960
No, you're not doing anything wrong. Since you claimed the Section 179 deduction and special "bonus" depreciation the first year you used this vehicle for your business, the remaining balance is depreciated over the useful life of the vehicle.
If you're using TurboTax Desktop, you can follow the depreciation calculations on the Car & Truck Worksheet for this vehicle under Part VI. Access this worksheet using Forms Mode.
To calculate the depreciation for each year, multiply your remaining basis by the percentages below.
Depreciable basis = purchase price less Section 179 less Special Depreciation.
As you have noted, the actual depreciation expense is less if your business use is below 100%.
For a vehicle placed in service in 2023, here is a list of the percentages applied to the remaining basis each year:
Year 1 - 20.00%
Year 2 - 32.00%
Year 3 - 19.20%
Year 4 - 11.52%
Year 5 - 11.52%
Year 6 - 5.76%
The depreciation deduction is further limited for listed property (which includes passenger automobiles). The listed property maximums are as follows:
Year 1 - $20.400
Year 2 - $19,500
Year 3 - $11,700
Year 4 and later - $6,960