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If you buy a new car, you can write off part of the cost every year for five years. How to do if I bought a car in 2022? How much can I write off in 1 year?
AI accountant’s answer:
If you bought a car in 2022, the amount you can write off depends on whether you're using the car for business or personal use. If you're using the car for business purposes, you may be able to take a depreciation deduction on the car under the Modified Accelerated Cost Recovery System (MACRS). The IRS provides specific depreciation periods and rates for different types of property, including vehicles. For passenger vehicles, trucks, and vans, the depreciation period is typically 5 years. The MACRS depreciation method follows a certain depreciation schedule: 1st year: 20% 2nd year: 32% 3rd year: 19.2% 4th year: 11.52% 5th year: 11.52% 6th year: 5.76% These percentages are applied to the car's depreciable basis, which is the cost of the car minus the salvage value, if applicable. Keep in mind that there are annual dollar limits for depreciation deductions on passenger vehicles. For 2022, the limits are: 1st year: $10,200, or $18,200 if you qualify and claim the special depreciation allowance (also known as bonus depreciation) 2nd year: $16,400 3rd year: $9,800 Each succeeding year: $5,860 until fully depreciated If you use the car for both personal and business purposes, you will need to allocate the amount of use between these two categories, and you can only take the depreciation deduction on the business-related portion. Make sure to track your business and personal use of the vehicle, as well as keep records of your expenses. Lastly, if you use the car purely for personal purposes, you cannot write off the cost or depreciate the vehicle, as it's not considered a deductible expense. Please note that individual circumstances may vary, and it is advisable to consult a tax professional to determine the best approach for your specific situation.
Comment from reviewer
Jacques Seys, CPA
Not Correct.
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