On July 10, 2018, Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds. The SUV is used 100% for business. Determine Ariff's maximum deduction for 2018, assuming Ariff's § 179 business income is $110,000. Ariff does not take additional first-year depreciation.

Question

Quizplus · Accepted Answer

Since the SUV is used 100% for business, the entire cost of the SUV is eligible for § 179 expensing. The maximum § 179 deduction for 2018 is limited to $1,000,000.

However, the § 179 deduction is phased out once the total cost of property placed in service during the year exceeds $2,500,000. In our case, the total cost of the SUV is $70,000, which is well below the $2,500,000 threshold, so we don't have to worry about any phase-out.

Therefore, Ariff can deduct the entire cost of the SUV using § 179, up to the maximum of $70,000 (which is less than the $1,000,000 limit).

Note that the answer of $34,000 comes from confusing the § 179 limit with the limit under special depreciation rules for SUVs. However, the question explicitly states that Ariff is not taking any additional first-year depreciation.

On July 10, 2018, Ariff Places in Service a New