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Hans purchased a new passenger automobile on August 17, 2022, for $30,000. During the year, the car was used 40% for business and 60% for personal use. Determine his cost recovery deduction for the car for 2022.

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If Hans purchased a new passenger automobile on August 17, 2022, for $30,000. His cost recovery deduction for the car for 2022 is: $1,200.

Cost recovery deduction

Personal use property  car is  limited to 4,000 calculated as (10,000×.40) which represent the following:

  • Half year convention
  • Year in use
  • Five year asset (auto)

Hence:

Cost recovery deduction:

Cost recovery deduction=(30,000×.10)×.40

Cost recovery deduction=3000×.40

Cost recovery deduction=$1200

Therefore If Hans purchased a new passenger automobile on August 17, 2022, for $30,000. His cost recovery deduction for the car for 2022 is: $1,200.

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