Question

On April 5, 2020, Kinsey places in service a new automobile that cost $60,000. He does not elect § 179 expensing, and he elects not to take any available additional first-year depreciation. The car is used 70% for business and 30% for personal use in each tax year. Kinsey chooses the MACRS 200% declining-balance method of cost recovery (the auto is a 5-year asset).

Assume the following luxury automobile limitations: year 1: $10,100; year 2: $16,100.

Compute the total depreciation allowed for:

2020:
2021:

Answer 1

ANSWER

From the table,

Rate for year 2020 (1st year) = 20%

Rate for year 2021 (2nd year) = 32%

Now,

Total depreciation allowed for year 2020

= Lower of, 70% of MACRS recovery amount or 70% of recovery limit

= Lower of, [$60000×20%]×70% (or) [$10100]×70%

= Lower of, $8400 (or) $7070

= $7,070

Total depreciation allowed for year 2021

= Lower of, 70% of MACRS recovery amount or 70% of recovery limit

= Lower of, [$60000×32%]×70% (or) [$16100]×70%

= Lower of, $13440 (or) $11270

= $11,270

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