There are limits of depreciation deduction that can be availed of on depreciable assets. Depreciation is a charge on the use of the assets that can be claimed as a deductible expense.
The taxpayer can avail of depreciation deduction on a property used in his business or trade. In case any property is deployed partly for business use and partly for personal use, the basis or cost of the property must be proportionately distributed between these uses. Then depreciation can be enjoyed on the bifurcated cost of the property allocated to business use.
Under the Internal Revenue Code, a taxpayer is allowed to report on the business use of an asset that may be required for personal reasons.
There are provisions in place to limit depreciation deduction on listed property. Listed property includes automobiles. Depreciation deductions are indexed to inflation.
Where the business use of an asset is restricted to less than 50%, only straight line method of depreciation may be availed of on the same.
Where listed property is not used for a qualified business, accelerated depreciation deductions taken earlier on it is recalled and added back to the income of the taxpayer.
(More:http://www.irs.gov/taxtopics/tc510.html)
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