Is it possible to depreciate an old car?

Forum|Forum|6 years ago
June 4, 2019
2 replies
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If an older car, a 2008 Camry is now being used for business starting July 2017, can depreciation be applied or is the car too old? Based on the miles, it is being used for business 80% and 20% personal. Can I still take depreciation or is it too old? If depreciation is possible, what is the cost basis? Is it the amount we paid when it was bought brand new in 2008, or the fair market value when it was placed in service July 2017?

TurboTax Self Employed Online

Best answer by Coleen3

Yes, you can depreciate it but you can't a section 179. You must also use as your depreciable amount the lower of Fair Market Value of Adjusted Basis on the conversion date.

What Property Qualifies?

To qualify for the section 179 deduction, your property must meet all the following requirements.

It must be eligible property.
It must be acquired for business use
It must have been acquired by purchase.
It must not be property described later under What Property Does Not Qualify .

Property Acquired for Business Use

To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify

Coleen3Answer

Employee

Yes, you can depreciate it but you can't a section 179. You must also use as your depreciable amount the lower of Fair Market Value of Adjusted Basis on the conversion date.

What Property Qualifies?

To qualify for the section 179 deduction, your property must meet all the following requirements.

It must be eligible property.
It must be acquired for business use
It must have been acquired by purchase.
It must not be property described later under What Property Does Not Qualify .

Property Acquired for Business Use

Kris3Author

Thanks a lot TurboTaxColeen, you explained it well.

excentr

I have a similar question but different: if you bought a used (15 year old) car in 2018 and took the standard mileage rate but want to change this year to the actual expense method, do you HAVE to claim depreciation and file form 4652 or do you have the option to use the actual expense method and not claim depreciation?

Mosaic

Actually the IRS is the best place to get answers to tax questions. You can depreciate an old car IF you just bought it and put it into service the first year you bought it. Otherwise you must use standard mileage deduction. They consider it 5 years depreciation, which means your car was fully depreciated before you put it into use.

My 5 year old car was just purchased, and put to use immediately. Therefore I take the purchase base with taxes and registration, and multiply by percentage used for business. That number is then divided over 6 years, 1/2 a year the first year, half a year the 6th year. If you qualify for both deductions, see which type gives you the better return.

Opus 17

Employee

@Mosaic wrote:

Actually the IRS is the best place to get answers to tax questions. You can depreciate an old car IF you just bought it and put it into service the first year you bought it. Otherwise you must use standard mileage deduction. They consider it 5 years depreciation, which means your car was fully depreciated before you put it into use.

Sorry, that is not quite correct. It is not necessary to have recently purchased an asset in order to take depreciation for business use. If you convert personal property to business use, you start taking depreciation as of the date the asset is placed in service, whether or not it was recently purchased. However, the basis for depreciation is either your cost basis, or the fair market value on the date the asset was placed into service, whichever is lower.

This general rule applies for any business asset. However, because cars (specifically, passenger vehicles under 6000 pounds) have 2 different methods to compute expenses, it will usually better to use the standard mileage method if you place an older vehicle in service with your business.