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IRS Provides Limits On Depreciation Deductions For Autos.

FEB. 4, 2002

Rev. Proc. 2002-14; 2002-1 C.B. 450

DATED FEB. 4, 2002
DOCUMENT ATTRIBUTES
Citations: Rev. Proc. 2002-14; 2002-1 C.B. 450

Amplified by Rev. Proc. 2003-75

Rev. Proc. 2002-14

SECTION 1. PURPOSE

[1] This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service during calendar year 2002, including separate limitations on passenger automobiles designed to be propelled primarily by electricity and built by an original equipment manufacturer (electric automobiles); (2) the amounts to be included in income by lessees of passenger automobiles first leased during calendar year 2002, including separate inclusion amounts for electric automobiles; and (3) the maximum allowable value of employer-provided automobiles first made available to employees for personal use in calendar year 2002 for which the vehicle cents-per-mile valuation rule provided under § 1.61-21(e) of the Income Tax Regulations may be applicable. 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. The maximum allowable automobile value for applying the vehicle cents-per-mile valuation rule reflects the automobile price inflation adjustment of § 280F(d)(7) as required by § 1.61- 21(e)(1)(iii)(A).

SECTION 2. BACKGROUND

[2] For owners of automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the automobile is placed in service and each succeeding year. In the case of electric automobiles placed in service after August 5, 1997, and before January 1, 2005, § 280F(a)(1)(C) requires tripling of these limitation amounts. 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.

[3] For leased automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of automobiles. Under § 1.280F-7(a), this reduction requires the lessees to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. There is a table for lessees of electric automobiles and a table for all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each tax year after the automobile is first leased.

[4] For automobiles first provided by employers to employees that meet the requirements of § 1.61-21(e)(1), the value to the employee of the use of the automobile may be determined under the vehicle cents-per-mile valuation rule of § 1.61-21(e). Section 1.61-21(e)(1)(iii) (A) provides that for an automobile first made available after 1988 to any employee of the employer for personal use, the value of the use of the automobile may not be determined under the vehicle cents-per-mile valuation rule for a calendar year if the fair market value of the automobile (determined pursuant to § 1.61-21(d)(5)(i) through (iv)) on the first date the automobile is made available to the employee exceeds $12,800 as adjusted by § 280F(d)(7).

SECTION 3. SCOPE AND OBJECTIVE

01. The limitations on depreciation deductions in section 4.02 of this revenue procedure apply to automobiles (other than leased automobiles) that are placed in service in calendar year 2002 and continue to apply for each tax year that the automobile remains in service.

02. The tables in section 4.03 of this revenue procedure apply to leased automobiles for which the lease term begins in calendar year 2002. Lessees of such automobiles must use these tables to determine the inclusion amount for each tax year during which the automobile is leased.

03. See Rev. Proc. 96-25 (1996-1 C.B. 681) for information on determining inclusion amounts for automobiles first leased before January 1, 1997; Rev. Proc. 97-20 (1997-1 C.B. 647) for automobiles first leased during calendar year 1997, including electric automobiles first leased on or after January 1, 1997, and before August 6, 1997; Rev. Proc. 98-24 (1998-1 C.B. 663) for electric automobiles first leased after August 5, 1997, and before January 1, 1998; Rev. Proc. 98-30 (1998-1 C.B. 930) for all automobiles first leased in calendar year 1998; Rev. Proc. 99-14 (1999-1 C.B. 413) for all automobiles first leased in calendar year 1999; Rev. Proc. 2000-18 (2000-9 I.R.B. 722) for all automobiles first leased in calendar year 2000, and Rev. Proc. 2001-19 (2001-9 I.R.B. 732) for all automobiles first leased in calendar year 2001.

04. The maximum fair market value figure in section 4.04(2) of this revenue procedure applies to employer-provided automobiles first made available to any employee for personal use in calendar year 2002. See Rev. Proc. 97-20, for the maximum fair market value figure for automobiles first made available in calendar year 1997; Rev. Proc. 98-30, for the maximum fair market value figure for automobiles first made available in calendar year 1998; Rev. Proc. 99-14, for the maximum fair market value figure for automobiles first made available in calendar year 1999; Rev. Proc. 2000-18, for the maximum fair market value figure for automobiles first made available in calendar year 2000; and Rev. Proc. 2001-19, for the maximum fair market value figure for automobiles first made available in calendar year 2001.

SECTION 4. APPLICATION

01. A taxpayer placing an automobile in service for the first time during calendar year 2002 is limited to the depreciation deduction shown in Table 1 of section 4.02(2) of this revenue procedure or, in the case of an electric automobile, Table 2 of this revenue procedure. A taxpayer first leasing an automobile in calendar year 2002 must determine the inclusion amount that is added to gross income using Table 3 of section 4.03 of this revenue procedure or, in the case of an electric automobile, Table 4 of this revenue procedure. In addition, the procedures of § 1.280F-7(a) must be followed. An employer providing an automobile for the first time in calendar year 2002 for the personal use of any employee may determine the value of the use of the automobile by using the cents-per-mile valuation rule in § 1.61-21(e) if the fair market value of the automobile does not exceed the amount specified in section 4.04(2) of this revenue procedure. If the fair market value of the automobile exceeds the amount specified in section 4.04(2) of this revenue procedure, the employer may determine the value of the use of the automobile under the general valuation rules of § 1.61-21(b) or under the special valuation rules of § 1.61-21(d) (Automobile lease valuation) or § 1.61-21(f) (Commuting valuation) if the applicable requirements are met.

02. Limitations on Depreciation Deductions for Certain Automobiles.

(1) Amount of the Inflation Adjustment. 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 CPI). The new car component of the CPI was 115.2 for October 1987 and 137.7 for October 2001. The October 2001 index exceeded the October 1987 index by 22.5. The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 2002 is 19.53125 percent (22.5/115.2 x 100%). This adjustment is applicable to all automobiles that are first placed in service in calendar year 2002. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.1953125, 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 electric automobiles) for calendar year 2002. To determine the dollar limitations applicable to an electric automobile first placed in service during calendar year 2002, the dollar limitations in § 280F(a) are tripled in accordance with § 280F(a)(1)(C) and are then multiplied by a factor of 0.1953125; the resulting increases, after rounding to the nearest $100, are added to the tripled 1988 limitations to give the depreciation limitations for calendar year 2002.

(2) Amount of the Limitation. For automobiles (other than electric automobiles) placed in service in calendar year 2002, Table 1 of this revenue procedure contains the dollar amount of the depreciation limitations for each tax year. For electric automobiles placed in service in calendar year 2002, Table 2 of this revenue procedure contains these amounts.

  REV. PROC. 2002-14 TABLE 1

 

 

               DEPRECIATION LIMITATIONS FOR AUTOMOBILES

 

                   (OTHER THAN ELECTRIC AUTOMOBILES)

 

             FIRST PLACED IN SERVICE IN CALENDAR YEAR 2002

 

      _________________________________________________

 

           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. 2002-14 TABLE 2

 

 

           DEPRECIATION LIMITATIONS FOR ELECTRIC AUTOMOBILES

 

             FIRST PLACED IN SERVICE IN CALENDAR YEAR 2002

 

 

       ________________________________________________

 

           Tax Year                           Amount

 

       ________________________________________________

 

           1st Tax Year                       $ 9,180

 

           2nd Tax Year                       $14,700

 

           3rd Tax Year                       $ 8,750

 

           Each Succeeding Year               $ 5,325

 

      _________________________________________________

 

 

03. Inclusions in Income of Lessees of Automobiles.

The inclusion amounts for automobiles first leased in calendar year 2002 are calculated under the procedures described in § 1.280F-7(a). Lessees of automobiles other than electric automobiles should use Table 3 of this revenue procedure in applying these procedures, while lessees of electric automobiles should use Table 4 of this revenue procedure.

  REV. PROC. 2002-14 TABLE 3

 

              DOLLAR AMOUNTS FOR AUTOMOBILES (OTHER THAN

 

                         ELECTRIC AUTOMOBILES)

 

           WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2002

 

 

 _____________________________________________________________________________

 

      Fair Market Value                          Tax Year During Lease

 

       of Automobile

 

                                        ______________________________________

 

                                          1st     2nd     3rd    4th      5th

 

                                                                          and

 

      Over           Not Over                                            Later

 

 _____________________________________________________________________________

 

    $15,500          15,800                2        3       5       6       6

 

     15,800          16,100                3        7       9      11      13

 

     16,100          16,400                4       10      14      17      19

 

     16,400          16,700                6       13      18      22      26

 

     16,700          17,000                7       16      23      28      31

 

     17,000          17,500                9       20      29      35      40

 

     17,500          18,000               11       25      37      44      50

 

     18,000          18,500               14       30      44      53      61

 

     18,500          19,000               16       35      52      62      72

 

     19,000          19,500               18       40      60      71      82

 

     19,500          20,000               21       45      67      80      93

 

     20,000          20,500               23       50      75      89     103

 

     20,500          21,000               25       56      82      98     114

 

     21,000          21,500               28       60      90     108     123

 

     21,500          22,000               30       66      97     117     134

 

     22,000          23,000               33       74     108     130     150

 

     23,000          24,000               38       84     123     149     171

 

     24,000          25,000               43       94     139     166     192

 

     25,000          26,000               47      104     154     185     213

 

     26,000          27,000               52      114     169     203     234

 

     27,000          28,000               57      124     185     220     255

 

     28,000          29,000               61      135     199     239     276

 

     29,000          30,000               66      145     214     258     296

 

     30,000          31,000               71      155     230     275     318

 

     31,000          32,000               75      165     245     294     338

 

     32,000          33,000               80      175     260     312     360

 

     33,000          34,000               85      185     276     329     381

 

     34,000          35,000               89      196     290     348     402

 

     35,000          36,000               94      206     305     367     422

 

     36,000          37,000               99      216     321     384     443

 

     37,000          38,000              103      226     336     403     464

 

     38,000          39,000              108      236     351     421     485

 

     39,000          40,000              112      247     366     439     506

 

     40,000          41,000              117      257     381     457     527

 

     41,000          42,000              122      267     396     475     549

 

     42,000          43,000              126      278     411     493     570

 

     43,000          44,000              131      288     426     512     590

 

     44,000          45,000              136      298     441     530     611

 

     45,000          46,000              140      308     457     548     632

 

     46,000          47,000              145      318     472     566     653

 

     47,000          48,000              150      328     487     584     674

 

     48,000          49,000              154      339     502     602     695

 

     49,000          50,000              159      349     517     620     717

 

     50,000          51,000              164      359     532     639     737

 

     51,000          52,000              168      369     548     657     758

 

     52,000          53,000              173      379     563     675     779

 

     53,000          54,000              177      390     578     693     800

 

     54,000          55,000              182      400     593     711     821

 

     55,000          56,000              187      410     608     729     842

 

     56,000          57,000              191      420     624     747     863

 

     57,000          58,000              196      430     639     766     883

 

     58,000          59,000              201      440     654     784     905

 

     59,000          60,000              205      451     669     802     925

 

     60,000          62,000              212      466     692     829     957

 

     62,000          64,000              222      486     722     866     999

 

     64,000          66,000              231      507     752     902   1,041

 

     66,000          68,000              240      527     783     938   1,083

 

     68,000          70,000              250      547     813     974   1,125

 

     70,000          72,000              259      568     843   1,011   1,166

 

     72,000          74,000              268      589     873   1,047   1,208

 

     74,000          76,000              277      609     904   1,083   1,250

 

     76,000          78,000              287      629     934   1,120   1,292

 

     78,000          80,000              296      650     964   1,156   1,334

 

     80,000          85,000              312      686   1,017   1,219   1,408

 

     85,000          90,000              335      737   1,092   1,311   1,512

 

     90,000          95,000              359      787   1,169   1,401   1,617

 

     95,000         100,000              382      838   1,245   1,491   1,722

 

     100,000        110,000              417      915   1,358   1,627   1,880

 

     110,000        120,000              463    1,017   1,509   1,810   2,089

 

     120,000        130,000              510    1,119   1,660   1,991   2,299

 

     130,000        140,000              556    1,221   1,812   2,172   2,509

 

     140,000        150,000              603    1,323   1,963   2,354   2,718

 

     150,000        160,000              649    1,425   2,115   2,535   2,928

 

     160,000        170,000              696    1,527   2,266   2,717   3,137

 

     170,000        180,000              742    1,629   2,418   2,898   3,347

 

     180,000        190,000              789    1,731   2,569   3,080   3,556

 

     190,000        200,000              835    1,833   2,720   3,262   3,766

 

     200,000        210,000              881    1,935   2,872   3,443   3,976

 

     210,000        220,000              928    2,037   3,023   3,625   4,185

 

     220,000        230,000              974    2,139   3,175   3,806   4,395

 

     230,000        240,000            1,021    2,241   3,326   3,988   4,604

 

     240,000        250,000            1,067    2,343   3,478   4,169   4,814

 

 _____________________________________________________________________________

 

 

                      REV. PROC. 2002-14 TABLE 4

 

                DOLLAR AMOUNTS FOR ELECTRIC AUTOMOBILES

 

           WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2002

 

 

 _____________________________________________________________________________

 

      Fair Market Value                          Tax Year During Lease

 

       of Automobile

 

                                        ______________________________________

 

                                          1st     2nd     3rd    4th      5th

 

                                                                          and

 

      Over           Not Over                                            Later

 

 _____________________________________________________________________________

 

    $46,000          47,000                3        6      10      11      12

 

     47,000          48,000                7       16      26      29      33

 

     48,000          49,000               12       26      41      47      54

 

     49,000          50,000               17       36      56      66      74

 

     50,000          51,000               21       47      71      83      96

 

     51,000          52,000               26       57      86     102     117

 

     52,000          53,000               31       67     101     120     138

 

     53,000          54,000               35       77     117     138     159

 

     54,000          55,000               40       87     132     156     180

 

     55,000          56,000               45       98     146     174     201

 

     56,000          57,000               49      108     161     193     222

 

     57,000          58,000               54      118     177     211     242

 

     58,000          59,000               59      128     192     229     264

 

     59,000          60,000               63      139     206     248     284

 

     60,000          62,000               70      154     229     275     316

 

     62,000          64,000               79      174     260     311     358

 

     64,000          66,000               89      195     290     347     400

 

     66,000          68,000               98      215     320     384     442

 

     68,000          70,000              107      236     350     420     484

 

     70,000          72,000              117      256     381     456     525

 

     72,000          74,000              126      276     411     493     567

 

     74,000          76,000              135      297     441     529     609

 

     76,000          78,000              145      317     472     564     652

 

     78,000          80,000              154      337     502     602     693

 

     80,000          85,000              170      373     555     665     767

 

     85,000          90,000              193      424     631     756     871

 

     90,000          95,000              217      475     706     847     976

 

     95,000         100,000              240      526     782     937   1,081

 

    100,000         110,000              275      602     896   1,073   1,239

 

    110,000         120,000              321      705   1,047   1,255   1,448

 

    120,000         130,000              368      806   1,199   1,436   1,658

 

    130,000         140,000              414      909   1,350   1,617   1,868

 

    140,000         150,000              460    1,011   1,501   1,800   2,076

 

    150,000         160,000              507    1,113   1,652   1,981   2,287

 

    160,000         170,000              553    1,215   1,804   2,163   2,496

 

    170,000         180,000              600    1,317   1,955   2,344   2,706

 

    180,000         190,000              646    1,419   2,107   2,525   2,916

 

    190,000         200,000              693    1,521   2,258   2,707   3,125

 

    200,000         210,000              739    1,623   2,410   2,888   3,335

 

    210,000         220,000              786    1,725   2,561   3,070   3,544

 

    220,000         230,000              832    1,827   2,712   3,252   3,754

 

    230,000         240,000              879    1,929   2,863   3,434   3,963

 

    240,000         250,000              925    2,031   3,015   3,615   4,173

 

 _____________________________________________________________________________

 

 

04. Maximum Automobile Value for Using the Cents-per-mile Valuation Rule.

(1) Amount of Adjustment. Under § 1.61- 21(e)(1)(iii)(A), the limitation on the fair market value of an employer-provided automobile first made available to any employee for personal use after 1988 is to be adjusted in accordance with § 280F(d)(7). Accordingly, the 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 CP1 automobile component for October 1987. See, section 4.02(1) of this revenue procedure. The new car component of the CPI was 115.2 for October 1987 and 137.7 for October 2000. The October 2000 index exceeded the October 1987 index by 22.5. The Internal Revenue Service has, therefore, determined that the adjustment for 2002 is 19.53125 percent (22.5/115.2 x 100%). This adjustment is applicable to all employer-provided automobiles first made available to any employee for personal use in calendar year 2002. The maximum fair market value specified in § 1.61-21(c)(1)(iii)(A) must therefore be multiplied by a factor of 0.1953125, and the resulting increase, after rounding to the nearest $100, is added to $12,800 to give the maximum value for calendar year 2002.

(2) The Maximum Automobile Value. For automobiles first made available in calendar year 2002 to any employee of the employer for personal use, the vehicle cents-per-mile valuation rule may be applicable if the fair market value of the automobile on the date it is first made available does not exceed $15,300.

SECTION 5. EFFECTIVE DATE

This revenue procedure applies to automobiles (other than leased automobiles) that are first placed in service during calendar year 2002, to leased automobiles that are first leased during calendar year 2002, and to employer-provided automobiles first made available to employees for personal use in calendar year 2002.

DRAFTING INFORMATION

The principal author of this revenue procedure is Bernard P. Harvey of the Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding the depreciation limitations and lessee inclusion amounts in this revenue procedure, contact Mr. Harvey at (202) 622-3110; for further information regarding the maximum automobile value for applying the vehicle cents-per-mile valuation rule, contact Dan E. Boeskin of the Office of the Associate Chief Counsel (Tax Exempt and Government Entities) at (202) 622-6040 (not toll-free calls).

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