Final answer:
The statement: The luxury auto limits are imposed before any percentage reduction for personal use is true.
Step-by-step explanation:
The statement: The luxury auto limits are imposed before any percentage reduction for personal use is true.
When determining the limits for luxury autos, the Internal Revenue Service (IRS) first imposes certain maximum depreciation limits based on the value of the vehicle. These limits are called luxury auto limits. Once the luxury auto limits are determined, any percentage reduction for personal use is then applied.
For example, let's say the luxury auto limit for a vehicle is $15,000 and the percentage reduction for personal use is 50%. If the fair market value of the vehicle is $30,000, the maximum depreciation deduction for tax purposes would be $7,500 (50% of $15,000), even though the actual fair market value of the vehicle is $30,000.