I know that you can write of depreciation on cars for up to 5 years. However, I was gifted a used car, which has been driven for more than 5 years by the previous owner. Can I write off depreciation of the car during the first 5 years that I use it?
if you are an employee you no longer get a deduction for vehicle usage. if you are an independent contractor who uses the vehicle in his job other than commuting to and from work you can take depreciation based on the Fair Market Value of the vehicle on the date of the gift. However, there is a standard mileage method that may produce a bigger deduction when all the expenses of the car are considered. we just don't have enough info to say which would be better the actual expenses method or the standard mileage method.
@ThomasVenner wrote:
I know that you can write of depreciation on cars for up to 5 years. However, I was gifted a used car, which has been driven for more than 5 years by the previous owner. Can I write off depreciation of the car during the first 5 years that I use it?
If you use the actual expense method, the basis for your depreciation is cost basis of the car. That is whatever the original purchaser paid, or the fair market value when you placed it in service, whichever is lower. (It is the FMV when you place it in service, not the FMV on the date of the gift, if the two dates are different.)
But with used cars especially, the standard mileage rate will almost always give you a bigger tax deduction, as noted by the first answer.
See chapter 4 here