The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2021 and the lease inclusion amounts for business vehicles first leased in 2021.
Luxury Passenger Car Depreciation Caps
The luxury car depreciation caps for a passenger car placed in service in 2021 limit annual depreciation deductions to:
Depreciation Caps for SUVs, Trucks, and Vans
The luxury car depreciation caps for a sport utility vehicle, truck, or van placed in service in 2021 are:
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:
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:
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:
So taxpayers who want to avoid these limits should "think big."