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2021 inflation adjustment for depreciation on cars and trucks is in

Each year, the Internal Revenue Service makes inflation adjustments for the allowable amount of depreciation that can be taken on cars and trucks. The IRS has just released the updated inflation adjustment for depreciation amounts for 2021.

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Passenger vehicles placed into service in 2021 that were acquired after September 27, 2017, for which first-year bonus depreciation applies will have a first-year depreciation limit of $18,200, $16,400 for the second year, $9,800 for the third year and $5,860 for each succeeding year.

Passenger vehicles to which no first-year bonus depreciation applies will have a first-year depreciation limit of $10,200, $16,400 in year two, $9,800 in year three and $5,860 for all succeeding years.

The revenue procedures also update the deduction limits for the cost of leasing a vehicle by lessees with lease terms beginning in 2021. The limits for deductions for the cost of leasing vehicles is expressed as an income inclusion amount. This amount is calculated using a complex formula, but the limitation amount which is calculated is intended to be similar to the depreciation limitations discussed previously.

While the adjustments for inflation typically do not result in significant changes from year to year, the information can be particularly helpful for business planning. There are a lot of rules regarding depreciation which can be difficult to understand. If you have any questions regarding inflation adjustment for depreciation, please contact a Henry+Horne professional for more information.

Christopher Cluff