Luxury Automobile

About Luxury Automobile:

for purposes of listed property depreciation limitations, any four-wheeled vehicle manufactured for use on public streets and highways, with an unloaded gross weight of 6,000 pounds or less and a cost of $13,800 or more (as of 1992). In the case of luxury cars, there are special rules restrict the depreciation write offs businesses can claim on vehicles. Modified accelerated cost recovery system depreciation (at 100% business use) is limited to $2,760 for the first year, $4,400 for the second year, $2,650 for the third year, and $1,575 annually thereafter. IRC (check if this IRC provision is current here) §280F.

The restrictions apply even when the rules permit “bonus deprecation” – such as the 50% bonus deprecation that was allowed for assets purchased in much of 2010 and 100% bonus depreciation for assets put in service after September 8, 2010 through December 31, 2011. Basically, Congress doesn't want to be subsidizing opulent luxury cars when less expensive vehicles can adequately serve the purpose of getting workers from point A to point B. Regardless of how much the taxpayer spent for a new business vehicle in 2010, for example, the maximum first year depreciation is generally limited to $11,060. The figure may be slightly higher for 2011. There is an important exception: If the taxpayer purchased a sport-utility vehicle with a loaded gross vehicle weight rating of more than 6,000 pounds for his or her business in 2010 (or 2011), the taxpayer can deduct all or part of the cost in the year of the purchase, rather than depreciating the cost over time. For SUVs with loaded weights between 6,000 and 14,000 pounds purchased in 2010 before September 9, the taxpayer can expense up to $25,000 of the cost of the vehicle and 50% of the remaining amount qualifies for bonus depreciation. If the taxpayer bought such a vehicle after September 8, 2010, the full amount could qualify for bonus depreciation and be written off in 2010.

See Depreciation in the United States Encyclopedia of Law and Depreciation in the World Encyclopedia of Law.