 Most of this information comes from Publication 946, have a depreciate property tax year 2022, you can find on the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're focused online on income remembering. The first half of the income tax formula is an essence and income statement, although just an outline of scaffolding other forms and schedules flowing into it, one of them being the Schedule C. It being an income statement in and of itself, having business income minus business expenses, the net business income in essence, flowing into line one income of our income tax formula. This is the form 1040, noting the Schedule C would flow into Schedule 1, which would then flow into page one of form 1040, line eight. We see here, this is the Schedule C profit or loss from business in essence and income statement, which has income and expenses. We're focused on the expenses here and we're focused primarily on or exclusively on, we're focused in the depreciation expense. The depreciation expense is gonna be an accrual type of concept. It's one of those concepts where even if you're using a cash based system, we have to deviate from that cash based system, put the asset on the books as an asset, as opposed to expensing it when we purchase it. So for example, if you're on a cash based system and you buy a large piece of equipment, then generally even if paying cash for that equipment, we can't just expense it as equipment expense, but rather usually have to put it on the books as an asset and then depreciate it, not according to generally accepted accounting principle depreciations, but rather in accordance to whatever the tax code says we have to do with regards to depreciation. Those two rules between normal accounting depreciation and tax depreciation being quite different, meaning depreciation from an accounting standpoint would try to allocate the cost of the thing that was purchased over the useful life that it was used in trying to accommodate the matching principle, meaning we wanna be depreciating the item, expensing it and allocating the expense to the same period in which it was used, consumed to generate revenue. Now, if you're on a cash based system, we usually record the expense when we pay the cash, but that usually lines up pretty close to the similar concept of an accrual based system for most transactions because the cash is usually spent in an area close to when we actually consumed the expense to generate revenue and it's easier to track the cash. But one reason we might have to deviate from that cash based system in this case is because it's such a big difference between when we paid for the equipment and when we actually used the equipment to generate revenue. If I bought a building that I'm gonna use for 30 years into the future and I just deducted like $100,000 in the year one for the purchase of the building, then that's a substantial deviation from the general concept that we would like from an accounting standpoint, which is to match the consumption of the item to when it was used to generate revenue. Now, the tax code, that's a justification in terms of why for taxes, we would have to deviate to an accrual basis method, but that's a bookkeeping kind of argument because on the tax side of things, they might have us put it on the books as an asset but still give us in essence the full depreciation using something like an accelerated method, double declining balance as an accelerated method as well as front loading with a 179 deduction, for example, or special depreciation. These are popular things for the lawmaker. Lawmakers went crazy. Because they allow us to depreciate more in the front years and the argument is that that stimulates the economy. So now we've got this big difference between depreciation for bookkeeping, which has a different goal to try to make the books accurate to make future decision-making on, and taxes, which kind of uses that same concept to try to get to an accurate income to charge taxes on, but also tries to adjust our behavior by making adjustments to that general concept to try to stimulate the economy or do whatever they're trying to do. Okay, so that said, let's see what's new for 2022. So what's new? Section 179 deduction dollar limit. So we'll dive into 179 in a lot more detail in future presentations. This is just what is new for 2022 here. This is one of those front loading things where they might allow you a bigger amount of the depreciation in year one. So for tax years beginning in 2022, the maximum section 179 expense deduction is $1,080,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,700,000. Also, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2022 is $27,000. So there's a big difference in terms of the limitations when we get to the sport utility vehicles because of the vehicle limitations which we'll dive into later. Depreciation limit on business vehicles. The total section 179 deduction and depreciation you can deduct for passenger automobile, including a truck or van you use in your business and first placed in service in 2022 is $19,200. If the special depreciation allowance applies or $11,200 if the special depreciation allowance does not apply, see maximum depreciation in chapter five. So we'll talk about depreciation methods, what methods you have to use to depreciate and then we'll dive into 179 special depreciate and special depreciation concepts as well as limitations for certain types of property such as automobiles where the government is skeptical of for some purposes and for good reason you would think. So what's new for 2023? So not tax year 2022 if we move on and think about what's going ahead in 2023. Sometimes it's useful to think about the crossover between the two years so you could do some planning between the two. Section 179 deduction dollar limits for tax years beginning in 2023, the maximum section 179 expense deduction is $1,160,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,890,000. Also the maximum 179 expense deductions for sport utility vehicles placed in service in tax years beginning in 2023 is $28,900. Now when you're learning the tax code just note that certain types of things that you would expect to basically be rolling forward in the future will be adjusted due to increases in inflation would be the general idea. So you would expect the concept to be moving forward and then they might have a code in there or a law that's gonna have them increasing certain dollar amounts in accordance with inflation if they're gonna be items that are expected to continue on into the future. These front-loaded depreciation, 179 and special depreciation have been quite popular but you might think at this point in time we've been overheating, so in terms of the economy. So you would think these are some things that are on the table that they might stop the 179 and stuff you would think if they were trying to stop the economy from overheating. So we'll see what they do going forward to be interesting. So phase down of special depreciation allowance the special depreciation allowance is 80% for certain qualified property acquired after September 27, 2017 and placed in service after December 31st, 2022 and before January 1st, 2024 other than certain property with a long production period and certain aircraft. So the special depreciation allowance is also 80% for certain specified plants bearing fruits and nuts planted or grafted after December 31st, 2022 and before January 1st, 2024 sees certain qualified property acquired after September 27, 2017 and what is qualified property later. Okay, so for more information you can take a look at some other publications obviously depreciation methods kind of dovetail on a lot of other types of topics that we can dive into some of which we've talked about some of which we're not going to go into too much more detail, but a car. So a car is gonna, you can look at other sources such as 463 travel gifts and car expenses because obviously that relates to like the standard message versus the mileage method and what kind of things are deductible and should you be depreciation versus taking a mileage method and so on residential rental property. So 527 residential rental property is a publication. You might wanna take a look at there. Obviously rental property has its own huge host of issues one of which is depreciation can be involved with office space in your home. So you can also take a look at publication 587