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IRS Announces Limits On Depreciation Deductions For Autos.

FEB. 16, 2010

Rev. Proc. 2010-18; 2010-9 I.R.B. 427

DATED FEB. 16, 2010
DOCUMENT ATTRIBUTES
Citations: Rev. Proc. 2010-18; 2010-9 I.R.B. 427

Amplified and Modified by Rev. Proc. 2011-21

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 2010, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2010, 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. Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. 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 inclusion 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 2010, 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 2010. 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. 2005-13, 2005-1 C.B. 759, for passenger automobiles first leased before calendar year 2006; Rev. Proc. 2006-18, 2006-1 C.B. 645, for passenger automobiles first leased during calendar year 2006; Rev. Proc. 2007-30, 2007-1 C.B. 1104; for passenger automobiles first leased during calendar year 2007, Rev. Proc. 2008-22, 2008-12 I.R.B. 658, for passenger automobiles first leased during calendar year 2008; and Rev. Proc. 2009-24, 2009-17 I.R.B. 885, for passenger automobiles first leased during calendar year 2009.

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. The term "CPI automobile component" is defined in § 280F(d)(7)(B)(ii) 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 137.851 for October 2009. The October 2009 index exceeded the October 1987 index by 22.651. Therefore, the automobile price inflation adjustment for 2010 for passenger automobiles (other than trucks and vans) is 19.66 percent (22.651/115.2 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.1966, 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 2010. This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2010.

(b) Trucks and vans. To determine the dollar limitations for trucks and vans first placed in service during calendar year 2010, the new truck component of the CPI is used instead of the new car component. The new truck component of the CPI was 112.4 for October 1987 and 140.897 for October 2009. The October 2009 index exceeded the October 1987 index by 28.497. Therefore, the automobile price inflation adjustment for 2010 for trucks and vans is 25.35 percent (28.497/112.4 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.2535, 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 2010.

(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 2010. 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 2010.

                      REV. PROC. 2010-18 TABLE 1

 

 

          DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES

 

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

 

                                 2010

 

 

                    Tax Year                 Amount

 

 

                    1st Tax Year             $3,060

 

                    2nd Tax Year             $4,900

 

                    3rd Tax Year             $2,950

 

                    Each Succeeding Year     $1,775

 

 

                      REV. PROC. 2010-18 TABLE 2

 

 

   DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN

 

                          CALENDAR YEAR 2010

 

 

                    Tax Year                 Amount

 

 

                    1st Tax Year             $3,160

 

                    2nd Tax Year             $5,100

 

                    3rd Tax Year             $3,050

 

                    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 2010. 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. 2010-18 TABLE 3

 

 

               DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES

 

                     (THAT ARE NOT TRUCKS OR VANS)

 

           WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2010

 

 

 Fair Market Value of

 

 Passenger Automobile                     Tax Year During Lease

 

 

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

 

                                                                   later

 

 

 $16,700      $17,000        3        7        10        11           14

 

  17,000       17,500        4        8        13        15           16

 

  17,500       18,000        5       10        16        19           21

 

  18,000       18,500        6       13        18        23           26

 

  18,500       19,000        7       15        22        26           31

 

  19,000       19,500        8       17        25        30           35

 

  19,500       20,000        9       19        29        34           39

 

  20,000       20,500       10       21        32        38           44

 

  20,500       21,000       11       23        35        42           48

 

  21,000       21,500       12       26        38        45           53

 

  21,500       22,000       13       28        41        50           57

 

  22,000       23,000       14       31        46        56           63

 

  23,000       24,000       16       36        52        63           73

 

  24,000       25,000       18       40        59        71           81

 

  25,000       26,000       20       44        66        78           90

 

  26,000       27,000       22       49        71        86          100

 

  27,000       28,000       24       53        78        94          108

 

  28,000       29,000       26       57        85       101          118

 

  29,000       30,000       28       61        92       109          126

 

  30,000       31,000       30       66        97       117          135

 

  31,000       32,000       32       70       104       125          144

 

  32,000       33,000       34       74       111       132          153

 

  33,000       34,000       36       79       117       140          161

 

  34,000       35,000       38       83       123       148          171

 

  35,000       36,000       40       87       130       156          179

 

  36,000       37,000       42       92       136       163          188

 

  37,000       38,000       44       96       143       170          198

 

  38,000       39,000       46      100       149       179          206

 

  39,000       40,000       48      105       155       186          215

 

  40,000       41,000       50      109       162       194          224

 

  41,000       42,000       52      113       169       201          233

 

  42,000       43,000       54      118       174       210          241

 

  43,000       44,000       56      122       181       217          251

 

  44,000       45,000       58      126       188       225          259

 

  45,000       46,000       60      131       194       232          269

 

  46,000       47,000       61      135       201       240          277

 

  47,000       48,000       63      140       207       248          286

 

  48,000       49,000       65      144       213       256          295

 

  49,000       50,000       67      148       220       263          304

 

  50,000       51,000       69      153       226       271          313

 

  51,000       52,000       71      157       232       279          322

 

  52,000       53,000       73      161       239       287          331

 

  53,000       54,000       75      166       245       294          340

 

  54,000       55,000       77      170       252       302          348

 

  55,000       56,000       79      174       258       310          358

 

  56,000       57,000       81      178       265       318          366

 

  57,000       58,000       83      183       271       325          375

 

  58,000       59,000       85      187       278       333          384

 

  59,000       60,000       87      191       284       341          393

 

  60,000       62,000       90      198       294       352          406

 

  62,000       64,000       94      207       306       368          424

 

  64,000       66,000       98      215       320       382          443

 

  66,000       68,000      102      224       332       398          460

 

  68,000       70,000      106      232       346       413          478

 

  70,000       72,000      110      241       358       429          496

 

  72,000       74,000      114      250       371       444          513

 

  74,000       76,000      118      258       384       460          531

 

  76,000       78,000      122      267       396       476          549

 

  78,000       80,000      126      276       409       491          566

 

  80,000       85,000      132      291       432       518          598

 

  85,000       90,000      142      313       464       556          643

 

  90,000       95,000      152      334       497       594          687

 

  95,000      100,000      162      356       528       634          731

 

 100,000      110,000      177      388       577       691          798

 

 110,000      120,000      196      432       641       768          887

 

 120,000      130,000      216      475       705       846          976

 

 130,000      140,000      236      518       770       922        1,065

 

 140,000      150,000      256      561       834     1,000        1,154

 

 150,000      160,000      275      605       898     1,077        1,243

 

 160,000      170,000      295      648       963     1,153        1,333

 

 170,000      180,000      315      691     1,027     1,231        1,421

 

 180,000      190,000      334      735     1,091     1,308        1,510

 

 190,000      200,000      354      778     1,155     1,386        1,599

 

 200,000      210,000      374      821     1,220     1,462        1,688

 

 210,000      220,000      393      865     1,284     1,539        1,777

 

 220,000      230,000      413      908     1,348     1,617        1,866

 

 230,000      240,000      433      951     1,413     1,693        1,956

 

 240,000      and up       453      995     1,476     1,771        2,044

 

 

                      REV. PROC. 2010-18 TABLE 4

 

                  DOLLAR AMOUNTS FOR TRUCKS AND VANS

 

           WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2010

 

 

 Fair Market Value of

 

 Truck or Van                            Tax Year During Lease

 

 

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

 

                                                                   later

 

 

  17,000       17,500        3        6         9         10          11

 

  17,500       18,000        4        8        12         14          16

 

  18,000       18,500        5       10        15         18          21

 

  18,500       19,000        6       12        19         22          24

 

  19,000       19,500        7       15        21         26          29

 

  19,500       20,000        8       17        25         29          34

 

  20,000       20,500        9       19        28         33          38

 

  20,500       21,000       10       21        31         37          43

 

  21,000       21,500       11       23        35         41          47

 

  21,500       22,000       12       25        38         45          51

 

  22,000       23,000       13       29        42         51          58

 

  23,000       24,000       15       33        49         58          67

 

  24,000       25,000       17       37        56         66          76

 

  25,000       26,000       19       42        62         73          85

 

  26,000       27,000       21       46        68         82          93

 

  27,000       28,000       23       50        75         89         103

 

  28,000       29,000       25       55        81         97         111

 

  29,000       30,000       27       59        88        104         121

 

  30,000       31,000       29       63        94        113         129

 

  31,000       32,000       31       68       100        120         138

 

  32,000       33,000       33       72       107        127         148

 

  33,000       34,000       35       76       114        135         156

 

  34,000       35,000       37       81       119        143         165

 

  35,000       36,000       39       85       126        151         174

 

  36,000       37,000       41       89       133        158         183

 

  37,000       38,000       43       94       139        166         191

 

  38,000       39,000       45       98       145        174         201

 

  39,000       40,000       47      102       152        182         209

 

  40,000       41,000       49      106       159        189         218

 

  41,000       42,000       51      111       164        198         227

 

  42,000       43,000       53      115       171        205         236

 

  43,000       44,000       55      119       178        213         245

 

  44,000       45,000       57      124       184        220         254

 

  45,000       46,000       59      128       190        228         263

 

  46,000       47,000       60      133       197        235         272

 

  47,000       48,000       62      137       203        244         280

 

  48,000       49,000       64      142       209        251         290

 

  49,000       50,000       66      146       216        259         298

 

  50,000       51,000       68      150       223        266         308

 

  51,000       52,000       70      154       229        275         316

 

  52,000       53,000       72      159       235        282         325

 

  53,000       54,000       74      163       242        290         334

 

  54,000       55,000       76      167       249        297         343

 

  55,000       56,000       78      172       254        305         352

 

  56,000       57,000       80      176       261        313         361

 

  57,000       58,000       82      180       268        320         370

 

  58,000       59,000       84      185       274        328         378

 

  59,000       60,000       86      189       280        336         388

 

  60,000       62,000       89      195       291        347         401

 

  62,000       64,000       93      204       303        363         418

 

  64,000       66,000       97      213       315        379         436

 

  66,000       68,000      101      221       329        394         454

 

  68,000       70,000      105      230       341        410         472

 

  70,000       72,000      109      239       354        424         490

 

  72,000       74,000      113      247       367        440         508

 

  74,000       76,000      117      256       380        455         526

 

  76,000       78,000      121      264       393        471         543

 

  78,000       80,000      125      273       406        486         561

 

  80,000       85,000      131      289       428        513         592

 

  85,000       90,000      141      310       461        552         636

 

  90,000       95,000      151      332       492        591         681

 

  95,000      100,000      161      353       525        629         726

 

 100,000      110,000      176      386       573        686         793

 

 110,000      120,000      195      430       637        763         882

 

 120,000      130,000      215      473       701        841         971

 

 130,000      140,000      235      516       766        918       1,059

 

 140,000      150,000      255      559       830        995       1,149

 

 150,000      160,000      274      603       894      1,072       1,238

 

 160,000      170,000      294      646       958      1,150       1,326

 

 170,000      180,000      314      689     1,023      1,226       1,416

 

 180,000      190,000      333      733     1,087      1,303       1,505

 

 190,000      200,000      353      776     1,151      1,381       1,594

 

 200,000      210,000      373      819     1,216      1,457       1,683

 

 210,000      220,000      392      863     1,280      1,534       1,772

 

 220,000      230,000      412      906     1,344      1,612       1,861

 

 230,000      240,000      432      949     1,409      1,689       1,949

 

 240,000      250,000      452      992     1,473      1,766       2,039

 

 

SECTION 5. EFFECTIVE DATE

This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010.

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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