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IRS Announces Limits On Depreciation Deductions For Autos.

MAR. 2, 2012

Rev. Proc. 2012-23; 2012-14 I.R.B. 712

DATED MAR. 2, 2012
DOCUMENT ATTRIBUTES
Citations: Rev. Proc. 2012-23; 2012-14 I.R.B. 712

Part III

Administrative, Procedural, and Miscellaneous

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 2012, 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 2012, 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 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296 (Dec. 17, 2010) (the "Act") extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013.

Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as "§ 168(k) additional first year depreciation deduction") applies.

.03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax ("AMT") credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)).

Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation.

.04 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 2012, 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 2012. 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. 2007-30, 2007-1 C.B. 1104, for passenger automobiles first leased during calendar year 2007; Rev. Proc. 2008-22, 2008-1 C.B. 658, for passenger automobiles first leased during calendar year 2008; Rev. Proc. 2009-24, 2009-1 C.B. 885, for passenger automobiles first leased during calendar year 2009; Rev. Proc. 2010-18, 2010-1 C.B. 427, as amplified and modified by section 4.03 of Rev. Proc. 2011-21, 2011-1 C.B. 560, for passenger automobiles first leased during calendar year 2010; and Rev. Proc. 2011-21, for passenger automobiles first leased during calendar year 2011.

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 143.419 for October 2011. The October 2011 index exceeded the October 1987 index by 28.219. Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24.5 percent (28.219/115.2 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.245, 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 2012. This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012.

(b) Trucks and vans. To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, 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 146.607 for October 2011. The October 2011 index exceeded the October 1987 index by 34.207. Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30.43 percent (34.207/112.4 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.3043, 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 2012.

(2) Amount of the limitation. Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. 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 2012 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 2012 for which the § 168(k) additional first year depreciation deduction does not apply.

                      REV. PROC. 2012-23 TABLE 1

 

 

          DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES

 

                 (THAT ARE NOT TRUCKS OR VANS) PLACED

 

      IN SERVICE IN CALENDAR YEAR 2012 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. 2012-23 TABLE 2

 

 

    DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE

 

      IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL

 

             FIRST YEAR DEPRECIATION DEDUCTION APPLIES

 

 _____________________________________________________________________

 

 

      Tax Year                                          Amount

 

 _____________________________________________________________________

 

 

      1st Tax Year                                      $11,360

 

      2nd Tax Year                                      $ 5,300

 

      3rd Tax Year                                      $ 3,150

 

      Each Succeeding Year                              $ 1,875

 

 

                      REV. PROC. 2012-23 TABLE 3

 

 

 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT

 

   TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 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. 2012-23 TABLE 4

 

 

                  DEPRECIATION LIMITATIONS FOR TRUCKS

 

      AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH

 

     THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION

 

                            DOES NOT APPLY

 

 _____________________________________________________________________

 

 

      Tax Year                                          Amount

 

 _____________________________________________________________________

 

 

      1st Tax Year                                      $ 3,360

 

      2nd Tax Year                                      $ 5,300

 

      3rd Tax Year                                      $ 3,150

 

      Each Succeeding Year                              $ 1,875

 

 

.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 2012. 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. 2012-23 TABLE 5

 

 

                  DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES

 

                         (THAT ARE NOT TRUCKS OR VANS)

 

               WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012

 

 _______________________________________________________________________

 

 

 Fair Market Value of

 

 Passenger Automobile                        Tax Year During Lease

 

 ____________________   ____________________________________________________

 

 

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

 

 ___________________________________________________________________________

 

 

  $18,500   $19,000        2        4         5           6             8

 

   19,000    19,500        2        4         7           7             9

 

   19,500    20,000        2        5         8           8            10

 

   20,000    20,500        3        5         9          10            11

 

   20,500    21,000        3        6         9          12            12

 

   21,000    21,500        3        7        10          12            14

 

   21,500    22,000        3        8        11          13            16

 

   22,000    23,000        4        8        13          15            17

 

   23,000    24,000        4       10        15          17            20

 

   24,000    25,000        5       11        17          19            23

 

   25,000    26,000        6       12        19          21            26

 

   26,000    27,000        6       14        20          24            28

 

   27,000    28,000        7       15        22          26            31

 

   28,000    29,000        7       16        25          28            33

 

   29,000    30,000        8       18        25          32            35

 

   30,000    31,000        9       19        27          34            38

 

   31,000    32,000        9       20        30          36            41

 

   32,000    33,000       10       21        32          38            43

 

   33,000    34,000       10       23        33          41            46

 

   34,000    35,000       11       24        35          43            49

 

   35,000    36,000       12       25        37          45            52

 

   36,000    37,000       12       27        39          47            54

 

   37,000    38,000       13       28        41          49            57

 

   38,000    39,000       13       29        43          52            59

 

   39,000    40,000       14       30        45          54            62

 

   40,000    41,000       14       32        47          56            65

 

   41,000    42,000       15       33        49          58            68

 

   42,000    43,000       16       34        51          61            70

 

   43,000    44,000       16       36        52          63            73

 

   44,000    45,000       17       37        54          66            75

 

   45,000    46,000       17       38        57          67            78

 

   46,000    47,000       18       39        59          70            80

 

   47,000    48,000       19       40        61          72            83

 

   48,000    49,000       19       42        62          75            86

 

   49,000    50,000       20       43        64          77            89

 

   50,000    51,000       20       45        66          79            91

 

   51,000    52,000       21       46        68          81            94

 

   52,000    53,000       21       47        70          84            96

 

   53,000    54,000       22       48        72          86            99

 

   54,000    55,000       23       49        74          88           102

 

   55,000    56,000       23       51        76          90           104

 

   56,000    57,000       24       52        78          92           107

 

   57,000    58,000       24       54        79          95           110

 

   58,000    59,000       25       55        81          97           113

 

   59,000    60,000       26       56        83         100           115

 

   60,000    62,000       26       58        86         103           119

 

   62,000    64,000       28       60        90         108           124

 

   64,000    66,000       29       63        94         112           129

 

   66,000    68,000       30       66        97         117           135

 

   68,000    70,000       31       68       102         121           140

 

   70,000    72,000       32       71       105         126           145

 

   72,000    74,000       33       74       109         130           151

 

   74,000    76,000       35       76       113         135           156

 

   76,000    78,000       36       78       117         140           161

 

   78,000    80,000       37       81       120         145           166

 

   80,000    85,000       39       86       127         152           176

 

   85,000    90,000       42       92       137         163           189

 

   90,000    95,000       45       98       147         175           202

 

   95,000   100,000       48      105       155         187           215

 

  100,000   110,000       52      115       170         203           235

 

  110,000   120,000       58      127       189         227           262

 

  120,000   130,000       64      140       208         250           288

 

  130,000   140,000       70      153       227         272           315

 

  140,000   150,000       75      166       246         296           340

 

  150,000   160,000       81      179       265         318           368

 

  160,000   170,000       87      192       284         341           394

 

  170,000   180,000       93      204       304         364           420

 

  180,000   190,000       99      217       323         387           446

 

  190,000   200,000      105      230       342         409           473

 

  200,000   210,000      111      243       361         432           499

 

  210,000   220,000      116      256       380         455           526

 

  220,000   230,000      122      269       399         478           552

 

  230,000   240,000      128      282       418         501           578

 

  240,000    And up      134      294       437         524           605

 

 _____________________________________________________________________________

 

 

                         REV. PROC. 2012-23 TABLE 6

 

 

                       DOLLAR AMOUNTS FOR TRUCKS AND VANS

 

               WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012

 

 ________________________________________________________________________

 

 

 Fair Market Value of

 

 Passenger Automobile                        Tax Year During Lease

 

 ____________________   _________________________________________________

 

 

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

 

 _____________________________________________________________________________

 

 

   19,000    19,500        1        4         5           6             7

 

   19,500    20,000        2        4         6           7             9

 

   20,000    20,500        2        5         7           8            10

 

   20,500    21,000        2        5         8          10            11

 

   21,000    21,500        3        6         9          10            13

 

   21,500    22,000        3        6        10          12            14

 

   22,000    23,000        3        8        11          14            15

 

   23,000    24,000        4        9        13          16            18

 

   24,000    25,000        4       10        15          19            21

 

   25,000    26,000        5       11        17          21            24

 

   26,000    27,000        6       12        19          23            26

 

   27,000    28,000        6       14        21          25            29

 

   28,000    29,000        7       15        23          27            32

 

   29,000    30,000        7       17        24          30            34

 

   30,000    31,000        8       18        26          32            37

 

   31,000    32,000        9       19        28          34            40

 

   32,000    33,000        9       20        31          36            42

 

   33,000    34,000       10       21        33          39            44

 

   34,000    35,000       10       23        34          41            48

 

   35,000    36,000       11       24        36          44            50

 

   36,000    37,000       12       25        38          46            53

 

   37,000    38,000       12       27        40          48            55

 

   38,000    39,000       13       28        42          50            58

 

   39,000    40,000       13       29        44          53            60

 

   40,000    41,000       14       31        45          55            63

 

   41,000    42,000       14       32        48          57            66

 

   42,000    43,000       15       33        50          59            69

 

   43,000    44,000       16       34        52          61            72

 

   44,000    45,000       16       36        53          64            74

 

   45,000    46,000       17       37        55          66            77

 

   46,000    47,000       17       38        58          68            79

 

   47,000    48,000       18       40        59          70            82

 

   48,000    49,000       19       41        61          73            84

 

   49,000    50,000       19       42        63          75            87

 

   50,000    51,000       20       43        65          78            89

 

   51,000    52,000       20       45        66          80            93

 

   52,000    53,000       21       46        68          83            95

 

   53,000    54,000       21       48        70          84            98

 

   54,000    55,000       22       49        72          87           100

 

   55,000    56,000       23       50        74          89           103

 

   56,000    57,000       23       51        76          92           105

 

   57,000    58,000       24       52        78          94           108

 

   58,000    59,000       24       54        80          96           111

 

   59,000    60,000       25       55        82          98           114

 

   60,000    62,000       26       57        85         101           118

 

   62,000    64,000       27       60        88         106           123

 

   64,000    66,000       28       62        93         110           128

 

   66,000    68,000       29       65        96         115           134

 

   68,000    70,000       30       67       100         120           139

 

   70,000    72,000       32       70       103         125           144

 

   72,000    74,000       33       72       108         129           149

 

   74,000    76,000       34       75       111         134           155

 

   76,000    78,000       35       78       115         138           160

 

   78,000    80,000       36       80       119         143           165

 

   80,000    85,000       38       85       125         151           175

 

   85,000    90,000       41       91       135         163           187

 

   90,000    95,000       44       98       144         174           201

 

   95,000   100,000       47      104       154         185           214

 

  100,000   110,000       52      113       169         202           234

 

  110,000   120,000       57      127       187         225           261

 

  120,000   130,000       63      139       207         248           287

 

  130,000   140,000       69      152       226         271           313

 

  140,000   150,000       75      165       245         294           339

 

  150,000   160,000       81      178       264         316           366

 

  160,000   170,000       87      190       283         340           392

 

  170,000   180,000       92      204       302         362           419

 

  180,000   190,000       98      216       322         385           445

 

  190,000   200,000      104      229       340         409           471

 

  200,000   210,000      110      242       359         431           498

 

  210,000   220,000      116      255       378         454           524

 

  220,000   230,000      122      267       398         477           551

 

  230,000   240,000      127      281       416         500           577

 

  240,000    And up      133      294       435         523           603

 

 

SECTION 5. EFFECTIVE DATE

This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012.

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) 622-4930 (not a toll-free call).

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