Luxury vehicle bonus depreciation

[monicac]

If a client puts a new car into service on 12/27/20 and we take bonus depreciation the amount of depreciation is $15,405 but if they don't take bonus the depreciation amount is only $2,218.

Why if you take bonus it gives the whole amount but if you take regular it figures it at a fraction of the year?

Is there any reason why we would not want to take bonus depreciation?

[qbteachmt]

"Why if you take bonus it gives the whole amount but if you take regular it figures it at a fraction of the year?"

That's why it's called Bonus. Otherwise, it's regular.

"If a client puts a new car into service on 12/27/20"

That means 4 days of business use for the year. You put it into service late in the year, so you don't get much depreciation that first year.

"Is there any reason why we would not want to take bonus depreciation?"

Yes, that's part of tax planning and business management strategy.

It seems you have some reading to do:

https://www.investopedia.com/terms/b/bonusdepreciation.asp

https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-...

https://www.journalofaccountancy.com/news/2020/jul/2020-irs-inflation-adjustments-cars-trucks.html

(click their links to see IRS Rev Proc).

https://bradyware.com/business-vehicle-deductions-2020/

google:

why take bonus depreciation on vehicle

[monicac]

I actually have already read all of that but I am still wondering if it makes most sense to take the biggest write offs in the 1st and 2nd year?

so then would you say that bonus depreciation is always the best answer?

I can't find a good depreciation calculator. The ones I find online show a large deduction the 1st year then no deduction for the next 4 years which I know is not right because proseries shows the 2nd year deduction is $13,703 

[Camp1040]

• There is not any one answer fits all, concerning bonus depreciation, and most other tax planning or preparation scenarios. 

[qbteachmt · Accepted solution]

"I actually have already read all of that"

And then you Apply it to each analysis.

"so then would you say that bonus depreciation is always the best answer?"

Facts and Circumstances matter. Let's say they already have a loss for 2020. Taking Bonus now means there is no depreciation expense that would help for the upcoming years. Or, they intend to sell it and quick turnover means they have to recapture the depreciation as income.

"The ones I find online show a large deduction the 1st year then no deduction for the next 4 years which I know is not right because proseries shows the 2nd year deduction is $13,703"

You need to go to the IRS, then. Notice in the links and articles that Tax year matters, that Temporary provisions might be in place. Pay attention to the date on the article, if it states it was recently updated, etc. Start with the IRS; they are the keepers of the Facts.