Question

On March 15, 2023, Helen purchased and placed in service a new Escalade. The purchase price of the automobile was $62,000, and the vehicle had a rating of 6,500 GVW. The vehicle was used 100% for business. If required, round your answers to the nearest dollar. a. Assuming that Helen does not use additional first-year depreciation, calculate the total depreciation deduction that she can take on the vehicle for 2023. Section § 179 expense $______ 1 62,000 MACRS cost recovery ______ 2 0 Total deduction $______ 3 62,000 b. What is her total depreciation deduction if Helen decided to take additional first-year depreciation? $______ 4

Answer 1

Helen can potentially deduct the full purchase price of $62,000 as a Section 179 expense for the new Escalade used entirely for business purposes if she does not take additional first-year depreciation. If she opts for bonus depreciation, she could deduct a significant portion or the entire cost in the first year, dependent on business income limitations.

Step-by-step explanation:

In the scenario presented, Helen purchases a new Escalade for business use, which qualifies for depreciation deductions. Under the Modified Accelerated Cost Recovery System (MACRS), a vehicle with a rating of 6,500 GVW placed in service in 2023 can be depreciated. However, without taking into account additional first-year depreciation (also known as bonus depreciation), Helen can elect to use Section 179. The Section 179 deduction limit for 2023 on heavy vehicles such as this one would allow Helen to potentially deduct the entire purchase price of $62,000 if business income limitations allow it.

If Helen opts to take the additional first-year depreciation, she would be able to deduct a significant portion up to 100% of the vehicle cost in the first year. This is provided that the vehicle is used 100% for business purposes and considering the vehicle's GVW rating meets eligibility for the 100% bonus depreciation rule in place for assets acquired and placed in service after September 27, 2017, and before January 1, 2023. Nevertheless, the tax benefit may not exceed business income for the year.