Dollar Limits on Depreciation for Vehicles in 2022

Passenger vehicles, including light trucks and vans, that are purchased for business and placed in service in 2022 can be depreciated only up to a set dollar amount. And if the vehicles are leased, the deduction for lease payments must be reduced by an inclusion amount if the fair market value of the vehicle exceeds a set limit. The IRS announced the dollar limits and inclusion amounts for vehicles bought and placed in service or first leased in calendar year 2022 (Rev. Proc. 2022-17). These limits are dramatically different from those in 2021.

The dollar limit for vehicles placed in service in 2022 are:

• First year: $19,200 (or $11,200 if bonus depreciation is not used)
• Second year: $18,000
• Third year: $10,800
• Each succeeding year: $6,460

Note: Those who purchase a heavy SUV are not subject to these dollar limits and, for 2022, can effectively write-off the entire cost in the first year by claiming 100% bonus depreciation.

Leased vehicles. If a vehicle first leased for business in 2022 has a fair market value (FMV) over $56,000, then lease payments must be reduced by an “inclusion amount.” The inclusion amount depends on the FMV of the vehicle. For example, a vehicle first leased in January 2022 with an FMV of $71,000 has an inclusion amount for 2022 of $19.