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IRS Announces Limits on Depreciation Deductions for Automobiles

MAR. 24, 2017

Rev. Proc. 2017-29; 2017-14 I.R.B. 1065

DATED MAR. 24, 2017
DOCUMENT ATTRIBUTES
Citations: Rev. Proc. 2017-29; 2017-14 I.R.B. 1065

SECTION 1. PURPOSE

This revenue procedure provides: (1) tables of limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2017, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) tables of amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2017, including a separate table of inclusion amounts for lessees of trucks and vans. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7).

SECTION 2. BACKGROUND

.01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI "automobile component" (the "new trucks" component) than that used in the price inflation amount calculation for other passenger automobiles (the "new cars" component), resulting in somewhat higher depreciation deductions for trucks and vans. This change reflects the higher rate of price inflation for trucks and vans since 1988.

.02 Section 168(k)(1) provides that, in the case of qualified property, the depreciation deduction allowed under § 167(a) for the taxable year in which the property is placed in service includes an allowance equal to 50 percent of the property's adjusted basis (hereinafter, referred to as "§ 168(k) additional first year depreciation deduction"). The § 168(k) additional first year depreciation deduction generally applies to qualified property placed in service before January 1, 2020. Section 168(k)(2)(F)(i) and (iii) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles placed in service by the taxpayer before January 1, 2018, and to which the § 168(k) additional first year depreciation deduction applies.

.03 Tables 1 through 4 of this revenue procedure provide depreciation limitations for passenger automobiles placed in service during calendar year 2017. Table 1 (passenger automobiles that are not trucks or vans) and Table 2 (trucks and vans) provide depreciation limitations for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Table 3 (passenger automobiles that are not trucks or vans) and Table 4 (trucks and vans) provide depreciation limitations for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply. The § 168(k) additional first year depreciation deduction does not apply for 2017 if the taxpayer: (1) acquired the passenger automobile used; (2) did not use the passenger automobile during 2017 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(7); or (4) elected to increase the alternative minimum tax (AMT) credit limitation under § 53, instead of claiming the § 168(k) additional first year depreciation deduction, for qualified property placed in service during 2017 pursuant to § 168(k)(4).

.04 Section 280F(c)(2) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Table 5 applies to lessees of passenger automobiles that are not trucks and vans and Table 6 applies to lessees of trucks and vans. Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased.

SECTION 3. SCOPE

.01 The limitations on depreciation deductions in section 4.01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2017, and continue to apply for each taxable year that the passenger automobile remains in service.

.02 The tables in section 4.02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2017. Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. See Rev. Proc. 2012-23, 2012-14 I.R.B. 712, for passenger automobiles first leased during calendar year 2012; Rev. Proc. 2013-21, 2013-12 I.R.B. 660, for passenger automobiles first leased during calendar year 2013; Rev. Proc. 2014-21, 2014-11 I.R.B. 641, as amplified and modified by section 4.03 of Rev. Proc. 2015-19, 2015-8 I.R.B. 656, for passenger automobiles first leased during calendar year 2014; Rev. Proc. 2015-19, as amplified and modified by section 4.03 of Rev. Proc. 2016-23, 2016-16 I.R.B. 581, for passenger automobiles first leased during calendar year 2015, and Rev. Proc. 2016-23 for passenger automobiles first leased during calendar year 2016.

SECTION 4. APPLICATION

.01 Limitations on Depreciation Deductions for Certain Automobiles.

(1) Amount of the inflation adjustment.

(a) Passenger automobiles (other than trucks or vans). Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Section 280F(d)(7)(B)(ii) defines the term "CPI automobile component" as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. The new car component of the CPI was 115.2 for October 1987 and 143.032 for October 2016. The October 2016 index exceeded the October 1987 index by 27.832. Therefore, the automobile price inflation adjustment for 2017 for passenger automobiles (other than trucks and vans) is 24.2 percent (27.832/115.2 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.242, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2017. This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2017.

(b) Trucks and vans. To determine the dollar limitations for trucks and vans first placed in service during calendar year 2017, the Service uses the new truck component of the CPI instead of the new car component. The new truck component of the CPI was 112.4 for October 1987 and 156.189 for October 2016. The October 2016 index exceeded the October 1987 index by 43.789. Therefore, the automobile price inflation adjustment for 2017 for trucks and vans is 39.0 percent (43.789/112.4 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.390, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans. This adjustment applies to all trucks and vans that are first placed in service in calendar year 2017.

(2) Amount of the limitation. Tables 1 and 2 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2017. Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2017 for which the § 168(k) additional first year depreciation deduction applies. Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2017 for which the § 168(k) additional first year depreciation deduction does not apply.

                       REV. PROC. 2017-29 TABLE 1

 

    DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT

 

  TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2017 FOR WHICH THE

 

    § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES

 

 ______________________________________________________________________

 

 

                  Tax Year                      Amount

 

 ______________________________________________________________________

 

 

                  1st Tax Year                 $11,160

 

                  2nd Tax Year                  $5,100

 

                  3rd Tax Year                  $3,050

 

                  Each Succeeding Year          $1,875

 

 

                       REV. PROC. 2017-29 TABLE 2

 

    DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN

 

   CALENDAR YEAR 2017 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR

 

                     DEPRECIATION DEDUCTION APPLIES

 

 ______________________________________________________________________

 

 

                  Tax Year                      Amount

 

 ______________________________________________________________________

 

 

                  1st Tax Year                 $11,560

 

                  2nd Tax Year                  $5,700

 

                  3rd Tax Year                  $3,450

 

                  Each Succeeding Year          $2,075

 

 

                       REV. PROC. 2017-29 TABLE 3

 

           DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES

 

           (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN

 

        CALENDAR YEAR 2017 FOR WHICH THE § 168(k) ADDITIONAL

 

            FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY

 

 ______________________________________________________________________

 

 

                  Tax Year                      Amount

 

 ______________________________________________________________________

 

 

                  1st Tax Year                  $3,160

 

                  2nd Tax Year                  $5,100

 

                  3rd Tax Year                  $3,050

 

                  Each Succeeding Year          $1,875

 

 

                       REV. PROC. 2017-29 TABLE 4

 

    DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN

 

   CALENDAR YEAR 2017 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR

 

                  DEPRECIATION DEDUCTION DOES NOT APPLY

 

 ______________________________________________________________________

 

 

                  Tax Year                      Amount

 

 ______________________________________________________________________

 

 

                  1st Tax Year                  $3,560

 

                  2nd Tax Year                  $5,700

 

                  3rd Tax Year                  $3,450

 

                  Each Succeeding Year          $2,075

 

 

.02 Inclusions in Income of Lessees of Passenger Automobiles.

A taxpayer must follow the procedures in § 1.280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2017. In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure.

                       REV. PROC. 2017-29 TABLE 5

 

                DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES

 

                      (THAT ARE NOT TRUCKS OR VANS)

 

            WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2017

 

 ______________________________________________________________________________

 

 

 Fair Market Value of

 

 Passenger Automobile                        Tax Year During Lease

 

 ____________________       ___________________________________________________

 

 

 Over        Not Over       1st       2nd       3rd       4th       5th & later

 

 ______________________________________________________________________________

 

 

 $19,000     $19,500          6        14         20        23            27

 

  19,500      20,000          7        16         23        27            31

 

  20,000      20,500          8        18         26        30            35

 

  20,500      21,000          9        20         28        35            39

 

  21,000      21,500         10        21         32        38            44

 

  21,500      22,000         11        23         35        42            47

 

  22,000      23,000         12        27         39        47            53

 

  23,000      24,000         14        31         45        54            62

 

  24,000      25,000         16        34         52        61            70

 

  25,000      26,000         18        38         58        68            78

 

  26,000      27,000         19        43         63        75            87

 

  27,000      28,000         21        47         69        82            95

 

  28,000      29,000         23        51         75        89           103

 

  29,000      30,000         25        55         80        97           112

 

  30,000      31,000         27        58         87       104           120

 

  31,000      32,000         29        62         93       111           128

 

  32,000      33,000         30        67         99       118           136

 

  33,000      34,000         32        71        104       126           144

 

  34,000      35,000         34        75        110       133           152

 

  35,000      36,000         36        79        116       140           160

 

  36,000      37,000         38        82        123       147           169

 

  37,000      38,000         40        86        129       154           177

 

  38,000      39,000         41        91        134       161           186

 

  39,000      40,000         43        95        140       168           194

 

  40,000      41,000         45        99        146       175           202

 

  41,000      42,000         47       103        152       182           210

 

  42,000      43,000         49       106        159       189           218

 

  43,000      44,000         50       111        164       197           226

 

  44,000      45,000         52       115        170       204           234

 

  45,000      46,000         54       119        176       211           243

 

  46,000      47,000         56       123        182       218           251

 

  47,000      48,000         58       127        187       225           260

 

  48,000      49,000         60       130        194       232           268

 

  49,000      50,000         61       135        200       239           276

 

  50,000      51,000         63       139        206       246           284

 

  51,000      52,000         65       143        211       254           292

 

  52,000      53,000         67       147        217       261           301

 

  53,000      54,000         69       151        223       268           309

 

  54,000      55,000         70       155        229       275           318

 

  55,000      56,000         72       159        235       282           326

 

  56,000      57,000         74       163        241       289           334

 

  57,000      58,000         76       167        247       296           342

 

  58,000      59,000         78       171        253       303           350

 

  59,000      60,000         80       174        260       310           359

 

  60,000      62,000         82       181        268       321           371

 

  62,000      64,000         86       189        280       335           387

 

  64,000      66,000         90       197        292       349           404

 

  66,000      68,000         93       205        304       364           420

 

  68,000      70,000         97       213        315       379           436

 

  70,000      72,000        101       221        327       393           453

 

  72,000      74,000        104       229        339       407           470

 

  74,000      76,000        108       237        351       421           486

 

  76,000      78,000        111       245        363       436           502

 

  78,000      80,000        115       253        375       450           518

 

  80,000      85,000        122       267        396       474           548

 

  85,000      90,000        131       287        425       511           588

 

  90,000      95,000        140       307        455       546           630

 

  95,000     100,000        149       327        485       581           671

 

 100,000     110,000        162       357        530       635           733

 

 110,000     120,000        181       397        589       706           815

 

 120,000     130,000        199       437        649       777           898

 

 130,000     140,000        217       477        708       849           980

 

 140,000     150,000        235       517        768       920         1,062

 

 150,000     160,000        254       557        827       991         1,145

 

 160,000     170,000        272       597        887     1,062         1,227

 

 170,000     180,000        290       637        946     1,134         1,309

 

 180,000     190,000        308       677      1,006     1,205         1,391

 

 190,000     200,000        326       718      1,064     1,277         1,473

 

 200,000     210,000        345       757      1,124     1,348         1,556

 

 210,000     220,000        363       797      1,184     1,419         1,638

 

 220,000     230,000        381       837      1,244     1,490         1,721

 

 230,000     240,000        399       878      1,302     1,562         1,803

 

 240,000     and over       418       917      1,362     1,633         1,885

 

 

                       REV. PROC. 2017-29 TABLE 6

 

                   DOLLAR AMOUNTS FOR TRUCKS AND VANS

 

            WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2017

 

 ______________________________________________________________________________

 

 

 Fair Market Value of

 

     Truck or Van                            Tax Year During Lease

 

 ____________________       ___________________________________________________

 

 

 Over        Not Over       1st       2nd       3rd       4th       5th & later

 

 ______________________________________________________________________________

 

 

 $19,500     $20,000          4         8         11        13             16

 

  20,000      20,500          4        10         14        17             20

 

  20,500      21,000          5        12         17        21             23

 

  21,000      21,500          6        14         20        24             28

 

  21,500      22,000          7        16         23        28             32

 

  22,000      23,000          9        19         27        33             38

 

  23,000      24,000         10        23         34        40             46

 

  24,000      25,000         12        27         39        48             54

 

  25,000      26,000         14        31         45        55             62

 

  26,000      27,000         16        35         51        62             71

 

  27,000      28,000         18        39         57        69             79

 

  28,000      29,000         19        43         63        76             88

 

  29,000      30,000         21        47         69        83             96

 

  30,000      31,000         23        51         75        90            104

 

  31,000      32,000         25        55         81        97            112

 

  32,000      33,000         27        59         87       104            120

 

  33,000      34,000         29        63         93       111            129

 

  34,000      35,000         30        67         99       119            136

 

  35,000      36,000         32        71        105       126            145

 

  36,000      37,000         34        75        111       133            153

 

  37,000      38,000         36        79        117       140            161

 

  38,000      39,000         38        83        122       148            169

 

  39,000      40,000         40        87        128       155            177

 

  40,000      41,000         41        91        135       161            186

 

  41,000      42,000         43        95        141       168            194

 

  42,000      43,000         45        99        146       176            203

 

  43,000      44,000         47       103        152       183            211

 

  44,000      45,000         49       107        158       190            219

 

  45,000      46,000         50       111        165       196            228

 

  46,000      47,000         52       115        170       204            236

 

  47,000      48,000         54       119        176       211            244

 

  48,000      49,000         56       123        182       218            252

 

  49,000      50,000         58       127        188       225            261

 

  50,000      51,000         60       131        194       232            269

 

  51,000      52,000         61       135        200       240            277

 

  52,000      53,000         63       139        206       247            285

 

  53,000      54,000         65       143        212       254            293

 

  54,000      55,000         67       147        218       261            301

 

  55,000      56,000         69       151        224       268            309

 

  56,000      57,000         70       155        230       275            318

 

  57,000      58,000         72       159        236       282            326

 

  58,000      59,000         74       163        242       289            335

 

  59,000      60,000         76       167        248       296            343

 

  60,000      62,000         79       173        256       308            355

 

  62,000      64,000         82       181        269       321            372

 

  64,000      66,000         86       189        280       336            388

 

  66,000      68,000         90       197        292       350            404

 

  68,000      70,000         93       205        304       365            420

 

  70,000      72,000         97       213        316       379            437

 

  72,000      74,000        101       221        328       393            453

 

  74,000      76,000        104       229        340       407            470

 

  76,000      78,000        108       237        352       421            487

 

  78,000      80,000        111       245        364       436            503

 

  80,000      85,000        118       259        384       461            532

 

  85,000      90,000        127       279        414       497            573

 

  90,000      95,000        136       299        444       532            614

 

  95,000     100,000        145       319        474       567            656

 

 100,000     110,000        159       349        518       621            717

 

 110,000     120,000        177       389        578       692            800

 

 120,000     130,000        195       429        637       764            882

 

 130,000     140,000        213       470        696       835            964

 

 140,000     150,000        232       509        756       906          1,047

 

 150,000     160,000        250       549        816       977          1,129

 

 160,000     170,000        268       589        875     1,049          1,211

 

 170,000     180,000        286       630        934     1,120          1,293

 

 180,000     190,000        305       669        994     1,191          1,376

 

 190,000     200,000        323       709      1,054     1,262          1,458

 

 200,000     210,000        341       750      1,112     1,334          1,540

 

 210,000     220,000        359       790      1,172     1,405          1,623

 

 220,000     230,000        377       830      1,231     1,477          1,705

 

 230,000     240,000        396       870      1,290     1,548          1,787

 

 240,000     and over       414       910      1,350     1,619          1,870

 

 

SECTION 5. EFFECTIVE DATE

This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2017.

SECTION 6. DRAFTING INFORMATION

The principal author of this revenue procedure is Bernard P. Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Harvey at (202) 317-7005 (not a toll-free call).

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