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IRS Announces Limits on Depreciation Deductions for Autos

FEB. 25, 2014

Rev. Proc. 2014-21; 2014-11 I.R.B. 641

DATED FEB. 25, 2014
DOCUMENT ATTRIBUTES
Citations: Rev. Proc. 2014-21; 2014-11 I.R.B. 641

Amplified and Modified by Rev. Proc. 2015-19

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability.

(Also: Part I, §§ 280F; 1.280F-7.)

SECTION 1. PURPOSE

This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2014, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2014, 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) of the Internal Revenue Code.

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 280F(c) 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. One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. 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 2014, 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 2014. 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. 2009-24, 2009-17 I.R.B. 885, for passenger automobiles first leased during calendar year 2009; Rev. Proc. 2010-18, 2010-09 I.R.B. 427, as amplified and modified by section 4.03 of Rev. Proc. 2011-21, 2011-12 I.R.B. 560, for passenger automobiles first leased during calendar year 2010; Rev. Proc. 2011-21, for passenger automobiles first leased during calendar year 2011; Rev. Proc. 2012-23, 2012-14 I.R.B. 712, for passenger automobiles first leased during calendar year 2012, and Rev. Proc. 2013-21, 2013-12 I.R.B. 660, for passenger automobiles first leased during calendar year 2013.

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 144.169 for October 2013. The October 2013 index exceeded the October 1987 index by 28.969. Therefore, the automobile price inflation adjustment for 2014 for passenger automobiles (other than trucks and vans) is 25.1 percent (28.969/115.2 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.251, 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 2014. This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2014.

(b) Trucks and vans. To determine the dollar limitations for trucks and vans first placed in service during calendar year 2014, 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 151.877 for October 2013. The October 2013 index exceeded the October 1987 index by 39.477. Therefore, the automobile price inflation adjustment for 2014 for trucks and vans is 35.1 percent (39.477/112.4 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.351, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. This adjustment applies to all trucks and vans that are first placed in service in calendar year 2014.

(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 2014. 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 2014.

                           REV. PROC. 2014-21 TABLE 1

 

 

               DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES

 

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

 

                                      2014

 

 ______________________________________________________________________________

 

 

        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. 2014-21 TABLE 2

 

 

   DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN

 

                          CALENDAR YEAR 2014

 

 ______________________________________________________________________________

 

 

        Tax Year                                Amount

 

 ______________________________________________________________________________

 

 

      1st Tax Year                              $3,460

 

 

      2nd Tax Year                              $5,500

 

 

      3rd Tax Year                              $3,350

 

 

      Each Succeeding Year                      $1,975

 

 

.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 2014. In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 3 of this revenue procedure, while lessees of trucks and vans should use Table 4 of this revenue procedure.

                      REV. PROC. 2014-21 TABLE 3

 

 

               DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES

 

                     (THAT ARE NOT TRUCKS OR VANS)

 

           WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2014

 

 ______________________________________________________________________________

 

 

 Fair Market Value of                  Tax Year During Lease

 

 Passenger Automobile  _____________________________________________________

 

 

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

 

 ______________________________________________________________________________

 

 

 $18,500     $19,000        3          5            8       10           11

 

  19,000      19,500        3          6           10       11           13

 

  19,500      20,000        3          8           11       13           14

 

  20,000      20,500        4          8           13       14           17

 

  20,500      21,000        4          9           14       17           18

 

  21,000      21,500        5         10           15       18           21

 

  21,500      22,000        5         11           17       20           22

 

  22,000      23,000        6         13           18       23           25

 

  23,000      24,000        7         14           22       26           29

 

  24,000      25,000        8         16           25       29           33

 

  25,000      26,000        8         19           27       32           38

 

  26,000      27,000        9         20           31       35           42

 

  27,000      28,000       10         22           33       40           45

 

  28,000      29,000       11         24           36       43           49

 

  29,000      30,000       12         26           39       46           53

 

  30,000      31,000       13         28           41       50           57

 

  31,000      32,000       14         30           44       53           61

 

  32,000      33,000       14         32           47       56           65

 

  33,000      34,000       15         34           50       59           69

 

  34,000      35,000       16         36           52       64           72

 

  35,000      36,000       17         38           55       67           76

 

  36,000      37,000       18         39           59       70           80

 

  37,000      38,000       19         41           61       74           84

 

  38,000      39,000       20         43           64       77           88

 

  39,000      40,000       21         45           67       80           92

 

  40,000      41,000       21         47           70       84           96

 

  41,000      42,000       22         49           73       87          100

 

  42,000      43,000       23         51           75       91          104

 

  43,000      44,000       24         53           78       94          108

 

  44,000      45,000       25         55           81       97          112

 

  45,000      46,000       26         56           84      101          116

 

  46,000      47,000       27         58           87      104          120

 

  47,000      48,000       28         60           90      107          124

 

  48,000      49,000       28         62           93      111          127

 

  49,000      50,000       29         64           96      114          131

 

  50,000      51,000       30         66           98      118          135

 

  51,000      52,000       31         68          101      121          139

 

  52,000      53,000       32         70          104      124          143

 

  53,000      54,000       33         72          106      128          147

 

  54,000      55,000       34         74          109      131          151

 

  55,000      56,000       34         76          112      135          155

 

  56,000      57,000       35         78          115      138          159

 

  57,000      58,000       36         80          118      141          163

 

  58,000      59,000       37         81          121      145          167

 

  59,000      60,000       38         83          124      148          171

 

  60,000      62,000       39         86          128      153          177

 

  62,000      64,000       41         90          134      159          185

 

  64,000      66,000       43         94          139      167          192

 

  66,000      68,000       44         98          145      173          201

 

  68,000      70,000       46        102          150      180          209

 

  70,000      72,000       48        105          156      188          216

 

  72,000      74,000       50        109          162      194          224

 

  74,000      76,000       51        113          168      200          232

 

  76,000      78,000       53        117          173      208          239

 

  78,000      80,000       55        120          179      215          247

 

  80,000      85,000       58        127          189      226          261

 

  85,000      90,000       62        137          203      243          281

 

  90,000      95,000       67        146          217      260          301

 

  95,000     100,000       71        156          231      277          320

 

 100,000     110,000       77        170          253      303          349

 

 110,000     120,000       86        189          281      337          389

 

 120,000     130,000       95        208          310      370          428

 

 130,000     140,000      103        228          337      405          467

 

 140,000     150,000      112        247          366      438          507

 

 150,000     160,000      121        266          394      473          545

 

 160,000     170,000      130        284          423      507          585

 

 170,000     180,000      138        304          451      541          624

 

 180,000     190,000      147        323          479      575          663

 

 190,000     200,000      156        342          507      609          703

 

 200,000     210,000      164        361          536      643          742

 

 210,000     220,000      173        380          565      676          781

 

 220,000     230,000      182        399          593      710          821

 

 230,000     240,000      190        418          622      744          860

 

 240,000    and over      199        437          650      778          899

 

 

                           REV. PROC. 2014-21 TABLE 4

 

 

                       DOLLAR AMOUNTS FOR TRUCKS AND VANS

 

               WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2014

 

 

 ______________________________________________________________________________

 

 

 Fair Market Value of                  Tax Year During Lease

 

 Passenger Automobile  _____________________________________________________

 

 

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

 

 ______________________________________________________________________________

 

 

 $19,000     $19,500        2          4            5        7            8

 

  19,500      20,000        2          5            7        8           10

 

  20,000      20,500        3          6            8       10           12

 

  20,500      21,000        3          7           10       11           14

 

  21,000      21,500        3          8           11       14           15

 

  21,500      22,000        4          9           12       15           18

 

  22,000      23,000        5         10           15       17           21

 

  23,000      24,000        5         12           18       21           24

 

  24,000      25,000        6         14           20       25           28

 

  25,000      26,000        7         16           23       28           32

 

  26,000      27,000        8         18           26       31           36

 

  27,000      28,000        9         20           28       35           40

 

  28,000      29,000       10         21           32       38           44

 

  29,000      30,000       11         23           35       41           48

 

  30,000      31,000       11         26           37       45           52

 

  31,000      32,000       12         27           41       48           56

 

  32,000      33,000       13         29           43       52           60

 

  33,000      34,000       14         31           46       55           64

 

  34,000      35,000       15         33           49       58           68

 

  35,000      36,000       16         35           51       62           72

 

  36,000      37,000       17         37           54       65           76

 

  37,000      38,000       18         38           58       69           79

 

  38,000      39,000       18         41           60       72           83

 

  39,000      40,000       19         43           63       75           87

 

  40,000      41,000       20         44           66       79           91

 

  41,000      42,000       21         46           69       82           95

 

  42,000      43,000       22         48           72       85           99

 

  43,000      44,000       23         50           74       89          103

 

  44,000      45,000       24         52           77       93          106

 

  45,000      46,000       24         54           80       96          111

 

  46,000      47,000       25         56           83       99          115

 

  47,000      48,000       26         58           86      102          119

 

  48,000      49,000       27         60           88      106          123

 

  49,000      50,000       28         62           91      109          127

 

  50,000      51,000       29         63           95      113          130

 

  51,000      52,000       30         65           97      117          134

 

  52,000      53,000       31         67          100      120          138

 

  53,000      54,000       31         69          103      123          142

 

  54,000      55,000       32         71          106      126          146

 

  55,000      56,000       33         73          108      130          150

 

  56,000      57,000       34         75          111      133          154

 

  57,000      58,000       35         77          114      137          157

 

  58,000      59,000       36         79          116      141          161

 

  59,000      60,000       37         80          120      144          165

 

  60,000      62,000       38         84          123      149          172

 

  62,000      64,000       40         87          130      155          180

 

  64,000      66,000       41         91          136      162          187

 

  66,000      68,000       43         95          141      169          195

 

  68,000      70,000       45         99          146      176          203

 

  70,000      72,000       47        102          153      182          211

 

  72,000      74,000       48        107          158      189          219

 

  74,000      76,000       50        110          164      196          227

 

  76,000      78,000       52        114          169      203          235

 

  78,000      80,000       54        118          175      209          243

 

  80,000      85,000       57        124          185      222          256

 

  85,000      90,000       61        134          199      239          276

 

  90,000      95,000       65        144          213      256          295

 

  95,000     100,000       70        153          227      273          315

 

 100,000     110,000       76        168          248      298          345

 

 110,000     120,000       85        187          277      332          383

 

 120,000     130,000       93        206          305      366          423

 

 130,000     140,000      102        225          334      400          462

 

 140,000     150,000      111        244          362      434          501

 

 150,000     160,000      120        263          390      468          541

 

 160,000     170,000      128        282          419      502          580

 

 170,000     180,000      137        301          447      536          619

 

 180,000     190,000      146        320          475      571          658

 

 190,000     200,000      154        339          504      604          698

 

 200,000     210,000      163        358          532      639          736

 

 210,000     220,000      172        377          561      672          776

 

 220,000     230,000      180        397          589      706          815

 

 230,000     240,000      189        416          617      740          854

 

 240,000    and over      198        435          645      774          894

 

 

SECTION 5. EFFECTIVE DATE

This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2014.

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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