How to Determine Maximum Depreciation
Depreciation is a non-cash expense used in accrual accounting in order to track the use of an asset. It is also used to better match revenues with expenses. Section 179 of the IRS code sets depreciation limits on property and vehicles. The code also set maximum limits on the amount that you can depreciate on the current tax year. The amount is influenced by the amount of new assets you put to use in the year.
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Instructions
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Look up the maximum depreciation expense you can have in any one tax year. The amount can vary from year to year; however, you can always look up the updated amount on the Section 179 of the IRS tax code. As of January 2010, the maximum amount you can depreciate is $250,000.
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Reduce this limit by the amount by which the cost of the asset being used in the tax year exceeds $800,000. This limit is reduced by the amount by which the cost of section 179 property placed in service in the tax year exceeds $800,000.
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Determine the maximum amount you can deduct for a vehicle. Vehicles have different rates of depreciation according to the IRS. The maximum amount that you can depreciate for a vehicle is $2,960 or $3,060 for a truck or van.
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Reduce the amount by the amount which the vehicle is used for personal reasons. If the vehicle is used for personal reasons 50 percent of the time, you can only depreciate 50 percent of the vehicle depreciation for that year.
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