Depreciation of Cars
I want to depreciate a $36000 car starting service 1/1/2018 and get around $18000 in depreciation for the first year. Can you tell me if this is possible and what will be the remaining depreciation for the year?
Depreciation carries a few factors:
Gas Prices – Think when hybrids first hit the market. Gas was ~$4/gallon and hybrids were in high demand. Overpriced and now that things have balanced out the hybrids from that time have depreciated
Mileage – No one wants a 1 or 2-year-old car with 100,000 miles.
Big News – VW big “diesel-gate” news killed stock prices and depreciated all VW’s out there.
Luxury Brands – Drive a brand new land rover off the lot? Your resale will not recover that price.
Optional Features – DVD players, fancy trim, etc. Those items don’t hold there value at all.
The best advice I can give is to talk to an accountant. They will help you guide the best way to assess your vehicle’s depreciation.
Best of luck
It is possible to be able to write off that much in depreciation for the first year. I recommend talking with your accountant to make sure that your car is depreciating correctly.
There are two ways you can deduct business car expenses- actual costs or mileage. Most of my clients do mileage because it usually out weighs the actual costs. Actual costs are depreciation, fuel costs, repair and maintenance costs, etc.
If you choose to do actual costs and depreciate the value of your vehicle, you have to remember that when you sell that vehicle in the future you will have to see if there is any taxable gains on the sale of the vehicle. For example, if you sale your vehicle for $10,000, you originally paid $30,000 for it and recognized $25,000 in depreciation for the life of owning the car. You are now subject to a $5,000 gain on the sale.
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