Question

On July 10, 2018, Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds. The SUV is used 100% for business. Determine Ariff's maximum deduction for 2018, assuming Ariff's § 179 business income is $110,000. Ariff does not take additional first-year depreciation. $2,960 0 $34,000 0 $70,000 $25,000 None of the above Since the SUV weighs over 6,000 pounds, it is not subject to the statutory dollar limits on luxury automobiles. § 179 expensing (limited to $25,000 for such SUVs) $25,000 Regular MACRS [($70,000 – $25,000) X.20] 9,000 Total $34,000

Could you help me with where is 0.20 come from? Regular MACRS [{700,00 - 25,000) * 0.20] , where is 0.20 come from and how can you get it ?  

Answer 1

Answer:-

Here 20 % or 0.20 taken from

Here weight is more than 6000 pounds (6300pounds) so normal depreciation rates is not applicable.

The IRS lets you depreciate cars / sports utility vehicle over a five-year period.

You can opt to use straight-line depreciation, which would write off 20 percent of the car's cost basis each year.

Were cars not subject to the restrictive rules, you would be entitled to a deduction, for a car / SUV
exclusively used in business, of 20% of the cost of the car in the year you place it into service. Also, it
is possible that you would qualify for an election to “expense” (i.e., deduct in the first year) an
additional amount of the car’s / SUV cost.