Luxury Passenger Car Depreciation Caps
The luxury car depreciation caps for passenger cars placed in service in 2021 are limited to the following annual depreciation deductions:
- $10,200 for the first year without bonus depreciation
- $18,200 for the first year with bonus depreciation
- $16,400 for the second year
- $9,800 for the third year
- $5,860 for the fourth through sixth year
Depreciation Caps for SUVs, Trucks and Vans
The luxury car depreciation caps for sport utility vehicles, trucks or vans placed in service in 2021 are:
- $10,200 for the first year without bonus depreciation
- $18,200 for the first year with bonus depreciation
- $16,400 for the second year
- $9,800 for the third year
- $5,860 for the fourth through sixth year
Excess Depreciation on Luxury Vehicles
If depreciation exceeds the annual cap, the excess depreciation is deducted beginning in the year after the vehicle’s regular depreciation period ends. The annual cap for this excess depreciation is:
- $5,860 for passenger cars
- $5,860 for SUVS, trucks and vans
Lease Inclusion Amounts for Cars, SUVs, Trucks and Vans
If a vehicle is first leased in 2021, a taxpayer must add a lease inclusion amount to gross income in each year of the lease if its fair market value at the time of the lease is more than:
- $51,000 for passenger cars
- $51,000 for SUVs, trucks or vans
The 2021 lease inclusion tables provide the lease inclusion amounts for each year of the lease. The lease inclusion amount results in a permanent reduction in the taxpayer’s deduction for the lease payments.
Vehicles Exempt from Depreciation Caps and Lease Inclusion Amounts
The depreciation caps and lease inclusion amounts do not apply to:
- Cars with an unloaded gross vehicle weight of more than 6,000 pounds
- SUVs, trucks and vans with a gross vehicle weight rating of more than 6,000 pounds
So basically, if you want to avoid these limits, “think big.”