2022 Luxury Automobile Depreciation Caps and Lease Inclusion Amounts - Buchbinder Tunick & Co (2024)

As an expert in tax regulations and business vehicle depreciation, I bring a wealth of knowledge to help you navigate the intricate landscape of IRS guidelines. With a proven track record in tax consulting and a deep understanding of the intricacies of luxury automobile depreciation, I am well-equipped to shed light on the concepts discussed in the provided article.

The IRS has laid out specific guidelines for luxury car depreciation limits for business vehicles placed in service in 2022, as well as lease inclusion amounts for business vehicles with leases commencing in the same year. Let's delve into the key concepts outlined in the article:

1. Luxury Passenger Car Depreciation Caps:

   • $11,200 for the first year without bonus depreciation.
   • $19,200 for the first year with bonus depreciation.
   • $18,000 for the second year.
   • $10,800 for the third year.
   • $6,460 for the fourth through the sixth year.

2. SUV, Truck, and Van Depreciation Caps:

   • Follow the same structure as passenger cars mentioned above.

3. Excess Depreciation on Luxury Vehicles:

   • If depreciation exceeds the annual cap, the excess will be deducted in the year following the vehicle's regular depreciation period.
   • The annual cap for excess depreciation is $6,460 for passenger cars, SUVs, trucks, and vans.

4. Lease Inclusion Amounts:

   • If a vehicle's lease began in 2022 and its fair market value at the lease inception is over $56,000, the taxpayer must add a lease inclusion amount to their gross income each year.
   • This inclusion results in a permanent reduction in the deduction for lease payments.
   • Refer to the 2022 lease inclusion tables for specific amounts for each year of the lease.

5. Exempt Vehicles:

   • Certain vehicles are exempt from depreciation caps and lease inclusion amounts.
   • This includes cars with an unloaded gross vehicle weight exceeding 6,000 pounds and SUVs, trucks, and vans with a gross vehicle weight rating (GVWR) exceeding 6,000 pounds.
   • Opting for larger vehicles can be a strategy to avoid these limitations.

If you have further questions or need assistance regarding vehicle depreciation for your business, it is advisable to reach out for professional advice. The IRS guidelines are intricate, and accurate understanding and application are crucial to maximizing tax benefits and avoiding pitfalls in business vehicle management.