Reference: https://www.chegg.

com/homework-help/questions-and-answers/car-loses-20-
sales-value-first-year-take-maximum-3-160-depreciation-bonus-depreciation-179-
q11396865
Question:
If a car loses more than 20% of its sales value in the first year, why can you only take a
maximum of $3,160 in depreciation? Is bonus depreciation of u/s179 available for luxury
automobiles? Should there be a luxury auto limitation? Should the limit be higher?
ANS-
Context header: Depreciation
Context explanation: Depreciation simply means decrease. The term depreciation is
commonly use in accounting filed where any asset over the time decrease its actual value, this
decrease is known as depreciation. For example machine, over the time machine has used
many time so it start losing their efficiency result value to over the time.
Answer and explanation:
When any buy any asset like vehicle, if one should get tax deduction on buying the asset,
then deduction is called depreciation. So under section 179 it allows business to make
deduction on depreciation for certain asset like vehicle, machinery.
If a car used only by 20% it means car is not efficiently used in service so it not qualified as
proper property and count for more deduction. Therefore, claim for more deduction, then
according to rule of section 179. The car should be in service not less than 50%. Therefore
the maximum deduction is allowed only $3,160. Here the other method of claiming more
depreciation is ADS method known as alternative depreciation system.
Yes, bonus depreciation under section 179 is available for luxury car limitation. The
limitation depends on the type, cost and weight of the vehicle.
Yes there is luxury automobile limitation because luxury car are very costly and incurred
heavy expense to purchase so to meet these cost there is provision in section 179. This
limitation on luxury car is depending on inflation rate in the country. If inflation rate is high
then limitation is also high.