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Increase in 2012 Vehicle Depreciation Dollar Limits

April 03, 2012

The IRS recently announced revised Code Sec. 280F dollar limitations for vehicles first placed into service during calendar year 2012. Code Sec. 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service within its business and for each succeeding year. Under Code Sec. 280F(d)(7), the IRS adjusts the amounts allowable as depreciation deductions for inflation.

Code Sec. 280F

Code Sec. 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service within its business and for each succeeding year. Under Code Sec. 280F(d)(7), the IRS adjusts the amounts allowable as depreciation deductions for inflation.

Bonus Depreciation

Another factor to take into account is bonus depreciation. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) generally extended the 50% additional first-year depreciation deduction under Code Sec. 168(k) to qualified property acquired and placed into service before January 1, 2013 (January 1, 2014 for certain longer-lived and transportation property).

Code Sec. 168(k)(2)(F)(i) increases the first-year depreciation allowed for vehicles subject to the Code Sec. 280F luxury-vehicle limits, unless the taxpayer elects out, by $8,000 to which the additional first-year depreciation deduction applies. The $8,000 amount is not adjusted for inflation. Sport utility vehicles and pickup trucks with a gross vehicle weight rating (GVWR) in excess of 6,000 pounds are exempt from the luxury vehicle depreciation caps.

Rev. Proc. 2012-23

In Rev. Proc. 2012-23, the IRS provides limits for passenger automobiles, light trucks and vans for which the additional first-year depreciation deduction rules under Code Sec. 168(k) apply. Rev. Proc. 2012-23 also provides limits for passenger automobiles, light trucks and vans for which the additional first-year depreciation deduction rules under Code Sec. 168(k) do not apply.

Passenger Automobiles

The maximum depreciation limits under Code Sec. 280F for passenger automobiles first placed in service by the taxpayer during the 2012 calendar year are:

  • $11,160 for the first tax year ($3,160 if bonus depreciation is not taken);
  • $5,100 for the second tax year;
  • $3,050 for the third tax year; and
  • $1,875 for each tax year thereafter.

Trucks and Vans

The maximum depreciation limits under Code Sec. 280F for trucks and vans first placed in service during the 2012 calendar year are:

  • $11,360 for the first tax year ($3,360 if bonus depreciation is not taken);
  • $5,300 for the second tax year;
  • $3,150 for the third tax year; and
  • $1,875 for each tax year thereafter.

Leases

Lease payments for vehicles used for business or investment purposes are deductible in proportion to the vehicle's business use. However, lessees must include a certain amount in income during the year the vehicle is leased to partially offset the amounts by which lease payments exceed the luxury auto limits. Rev. Proc. 2012-23 includes tables that identify the income exclusion amounts for passenger automobiles, trucks and vans with lease terms beginning in calendar year 2012.

 

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