Question

On April 5, 2019, Kinsey places in service a new passenger automobile that cost $60,000. The car is used 100% for business in each tax year. Kinsey uses the MACRS 200% declining-balance method of cost recovery (the auto is a 5-year asset). Assume Kinsey elects any available additional first-year depreciation. The maximum depreciation allowed for 2019 is $ 12000 X and for 2020 is $ 19200

Answer 1

The MACRS 200% declining balance method of depreciation, also known as double declining balance method, is a form of accelerated depreciation.

Given the cost of new passenger automobile is $60,000 and it is a 5 year asset.

Therefore annual depreciation for the first year should be 60000*20% = $12,000. ( since 5 years - 100/5 =20%)

However, since it is MACRS 200% declining balance method, the maximum depreciation allowed for 2019 would be 12000*2 = $24,000 (As the name suggests 200%, it is 12000*2)

Balance of asset at the end of 2019 is 60000 - 24000 = $36000.

Therefore the maximum depreciation allowed for 2020 is (36000*20%)*2 = 7200*2 = $14,400.

Therefore the answers are

For 2019 - $24,000

For 2020 - $14,400