July 30, 2020 12:14 am

Dollar Limits on and Inclusion Amounts for 2020 Vehicles

If you buy a vehicle in 2020 for business, depreciation cannot exceed set dollar limits announced by the IRS (Rev. Proc. 2020-37). For 2020, these limits aren’t triggered unless the cost of the vehicle is nearly $91,000, so they don’t matter to most businesses. The limits, which are the same dollar amounts that applied for vehicles purchased in 2019, are:

  • $18,100 for the first year (or $10,100 if bonus depreciation is not used)
  • $16,100 for the second year
  • $9,700 for the third year
  • $5,760 for each succeeding year

If the vehicle is used only partially for business, an allocation of the dollar limit is required. For example, if you buy a very expensive vehicle in 2020 and use it 80% for business, the dollar limit is $14,480 (80% of $18,100).

If you lease a vehicle in 2020 for business, you may have to reduce the deduction for lease payments by an inclusion amount. Just like 2018 and 2019, inclusion amounts do not begin until the vehicle’s value is over $50,000. The inclusion amounts are modest. For example, in 2020 if you lease a vehicle valued at $61,000 and use it 100% for business, the inclusion amount for 2020 is $26.

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Tax Glossary

Capital asset

Property subject to capital gain or loss treatment. Almost all assets you own are considered capital assets except for certain business assets or works you created.

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