Modified Accelerated Cost Recovery System (MACRS), Election to Expense, Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.3, 8.4, 8.5)

During 2022, William purchases the following capital assets for use in his catering business:

Line Item Description	Amount
New passenger automobile (September 30)	$66,000
Baking equipment (June 30)	10,000

Assume that William decides to use the election to expense on the baking equipment (and has adequate taxable income to cover the deduction) but not on the automobile, and he also uses the MACRS accelerated method to calculate depreciation but elects out of bonus depreciation.

Click here to access the depreciation table and click here to access the annual automobile depreciation limitations.

Calculate William's maximum depreciation deduction for 2022, assuming he uses the automobile 100 percent in his business.

TABLE 8.2

ACCELERATED DEPRECIATION FOR PERSONAL PROPERTY ASSUMING HALF-YEAR CONVENTION (FOR PROPERTY PLACED IN SERVICE AFTER DECEMBER 31, 1986)

Recovery Year		3-Year (200% DB)		5-Year (200% DB)		7-Year (200% DB)		10-Year (200% DB)		15-Year (150% DB)		20-Year (150% DB)
1			33.33			20.00			14.29			10.00			5.00			3.750
2			44.45			32.00			24.49			18.00			9.50			7.219
3			14.81	*		19.20			17.49			14.40			8.55			6.677
4			7.41			11.52	*		12.49			11.52			7.70			6.177
5						11.52			8.93	*		9.22			6.93			5.713
6						5.76			8.92			7.37			6.23			5.285
7									8.93			6.55	*		5.90	*		4.888
8									4.46			6.55			5.90			4.522
9												6.56			5.91			4.462	*
10												6.55			5.90			4.461
11												3.28			5.91			4.462
12															5.90			4.461
13															5.91			4.462
14															5.90			4.461
15															5.91			4.462
16															2.95			4.461
17																		4.462
18																		4.461
19																		4.462
20																		4.461
21																		2.231

*Switch to straight-line depreciation.

ANNUAL AUTOMOBILE DEPRECIATION LIMITATIONS
Year of Use	2022 Limits
Year 1	$19,200*
Year 2	18,000
Year 3	10,800
Year 4 (and subsequent years until fully depreciated)	6,460
*Additional bonus depreciation of $8,000 is included in this amount. If bonus is elected out of, the limit is $11,200.