Hans purchased a new passenger automobile on August 17, 2018, for $30,000. During the year the car was used 40% for business and 60% for personal use. Determine his cost recovery deduction for the car for 2018.
A) $500
B) $1,000
C) $1,200
D) $1,333
E) None of the above

Question

Quizplus · Accepted Answer

The cost recovery deduction for the car is calculated using the Modified Accelerated Cost Recovery System (MACRS) and the depreciation deduction is based on the business use percentage. For passenger automobiles placed in service in 2018, the maximum amount of depreciation deduction for the first year is $10,000, plus an additional $8,000 depreciation deduction for bonus depreciation.

Therefore, the total depreciation deduction for the car is $10,000 (maximum depreciation) x 40% (business use percentage) + $8,000 (bonus depreciation) x 40% (business use percentage) = $1,200.

Hans Purchased a New Passenger Automobile on August 17, 2018