Auto depreciation barriers make a large bounce for moment 12 months in a row

For the second one 12 months in a row, the IRS has issued sharply upper new depreciation barriers for passenger cars. Those limits are up to date yearly for inflation in step with the auto part of the chained client value index for city customers.

Rev. Proc. 2023-14, launched Wednesday, accommodates the Sec. 280F(a) inflation-adjusted greenback barriers on depreciation deductions for passenger cars — together with vehicles and trucks — got after Sept. 27, 2017, and positioned in carrier throughout 2023, for 2023 and each and every succeeding tax 12 months.

For passenger cars for which Sec. 168(ok) further first-year, or “bonus,” depreciation is carried out, the limitation is $20,200 for the primary tax 12 months, an building up of $1,000 from the 2022 quantity, which additionally used to be an building up of $1,000 from the 2021 quantity.

The succeeding-year barriers are $19,500 for the second one tax 12 months (an building up of $1,500 over 2022); $11,700 for the 3rd 12 months ($900 upper); and $6,960 for each and every 12 months after that (an building up of $500). If bonus depreciation does now not practice, the 2023 first-year limitation is $12,200 ($1,000 upper than 2022), and the succeeding years’ barriers are the similar as for automobiles eligible for the bonus depreciation.

The income process additionally supplies a desk of the inflation-updated quantities for a hire time period starting in calendar 2022 wherein a deduction for a leased passenger car should be decreased underneath Sec. 280F(c)(2). This limitation is expressed as an inclusion in gross source of revenue, which is made up our minds by way of making use of a system to a greenback quantity. The greenback quantities, for each and every tax 12 months throughout a hire, are correlated to levels of automobiles’ honest marketplace price.

For the one year finishing December 2022, the cost of used vehicles and vehicles dropped by way of 8.8% whilst the costs of recent vehicles higher by way of 5.9%, in step with the Bureau of Hard work Statistics. Each percentages are seasonally unadjusted.

— To remark in this article or to signify an concept for some other article, touch Martha Waggoner at [email protected].