Do you understand what depreciation is? If you don’t, you’re not alone, even a lot of accounting students have problems with the concept of depreciation.
Basically, depreciation in the accounting world is a way to spread the cost of a big huge purchase over time. A business owner would usually want to use depreciation for tax reasons. If you’re wondering if using a depreciation calculation would help you manage a big purchase for your business, we can help you figure that out.
The IRS publishes depreciation limits for vehicles, and they’re generally the same as last year.
For business cars that are new, the first-year limit is $11,160. If your business bought a used car, it’s $3,160. After the first year, the limits are the same for new and used cars, $5,100 for the second year and $3,050 for the third year. After that, the numbers are $1,875 in all subsequent years.
For vans and trucks, the first-year limit is $11,560 for new vehicles and $3560 for used vehicles. In the second year the limit for both used and new is $5,700, in the third year it’s $3,450, and in the remaining years it’s $2,075.
If you’re wondering where the change from last year is, the third year depreciation limit for trucks and vans is a hundred dollars more than in 2016. Not exactly a huge difference there.