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The safe harbor method of auto depreciation using section 168(k) has expired. How can I depreciate my car in 2023?

I am considering buying a $42k car this month for 100% business use and anticipated applying the 80% bonus depreciation in the first year (IRS section 168(k)) and depreciating the following years using half year convention MACRS. However, I am very troubled as I have come across the following statement on the IRS website: “the safe harbor method does not apply to a passenger automobile placed in service by the taxpayer after 2022, or to a passenger automobile for which the taxpayer elected out of the 100-percent additional first year depreciation deduction or elected under section 179 to expense all or a portion of the cost of the passenger automobile. “


The safe harbor method was what allowed people to take advantage of both the upfront depreciation introduced in code 168k and depreciate the years after but without the safe harbor method, that means the entire cost of the car is depreciated upfront and any excess basis remaining above the $20,200 limit cannot be deducted.


Here is an example of how car depreciation would work without the safe harbor method:


“A calendar-year taxpayer places in service in Dec. 2018 a passenger automobile that costs $50,000 and is qualified property for which the 100% additional first year depreciation deduction is allowable. The 100% additional first year depreciation deduction and any Code Sec. 179 deduction for this property is limited to $18,000 under Code Sec. 280F(a)(1)(A)(i), and the excess amount of $32,000 is recovered by the taxpayer starting 6 years later in 2024, subject to the annual limitation of $5,760 under Code Sec. 280F(a)(1)(B)(ii).”


This would mean that it would almost Never be beneficial for anyone to take advantage of the 80% bonus depreciation since the maximum deduction they can take is $20,200 and nothing more UNTIL 6 YEARS LATER.

Has the IRS given any guidance in regards to how to depreciate automobiles for the 2023 years after the safe harbor method has been phased out?


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2 Replies

The safe harbor method of auto depreciation using section 168(k) has expired. How can I depreciate my car in 2023?

Paging @Mike9241 who answered a parallel question.

The safe harbor method of auto depreciation using section 168(k) has expired. How can I depreciate my car in 2023?

@tagteam I believe this is the same user I previously responded to using a different screen name. the OP does not accept the explanation that the depreciation rules for autos change every year - the 280F limits. he's looking at a rev proc from 2019 - not valid for a vehicle acquired in 2023. this person believes that if he acquires a 50K auto in 2023 and takes bonus in 2023 no further depreciation is allowed until year 6 whereas if no bonus he can take depreciation each year. I have pointed him to PUB 946, the rev proc for 2023 for vehicles which specifies the depreciation limits and even an article from an accounting firm on how to compute depreciation for luxury and non-luxury autos which the OP does not believe are correct.



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