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IRS Announces Limits on Depreciation Deductions for Autos

FEB. 25, 2013

Rev. Proc. 2013-21; 2013-12 I.R.B. 660

DATED FEB. 25, 2013
DOCUMENT ATTRIBUTES
Citations: Rev. Proc. 2013-21; 2013-12 I.R.B. 660

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 2013, 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 2013, 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 331(a) of the American Taxpayer Relief Act of 2012, Pub. L. No. 112-240, 126 Stat. 2313 (Jan. 2, 2013) (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, 2014, 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, 2014.

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, 2012, that is round 3 extension property (as defined in § 168(k)(4)(J)(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 2013 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 2013, 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 2013. 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. 2008-22, 2008-1 C.B. 658, for passenger automobiles first leased during calendar year 2008; 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; and Rev. Proc. 2012-23, 2012-14 I.R.B. 712, for passenger automobiles first leased during calendar year 2012.

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 143.787 for October 2012. The October 2012 index exceeded the October 1987 index by 28.587. Therefore, the automobile price inflation adjustment for 2013 for passenger automobiles (other than trucks and vans) is 24.8 percent (28.587/115.2 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.248, 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 2013. This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2013.

(b) Trucks and vans. To determine the dollar limitations for trucks and vans first placed in service during calendar year 2013, 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 149.386 for October 2012. The October 2012 index exceeded the October 1987 index by 36.986. Therefore, the automobile price inflation adjustment for 2013 for trucks and vans is 32.9 percent (36.986/112.4 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.329, 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 2013.

(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 2013. 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 2013 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 2013 for which the § 168(k) additional first year depreciation deduction does not apply.

                      REV. PROC. 2013-21 TABLE 1

 

 

          DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES

 

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

 

     2013 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. 2013-21 TABLE 2

 

 

    DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE

 

      IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST

 

                  YEAR DEPRECIATION DEDUCTION APPLIES

 

 _____________________________________________________________________

 

 

      Tax Year                                           Amount

 

 _____________________________________________________________________

 

 

      1st Tax Year                                      $11,360

 

      2nd Tax Year                                       $5,400

 

      3rd Tax Year                                       $3,250

 

      Each Succeeding Year                               $1,975

 

 

                      REV. PROC. 2013-21 TABLE 3

 

 

          DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES

 

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

 

     2013 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. 2013-21 TABLE 4

 

 

    DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE

 

      IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST

 

              YEAR DEPRECIATION DEDUCTION DOES NOT APPLY

 

 _____________________________________________________________________

 

 

      Tax Year                                           Amount

 

 _____________________________________________________________________

 

 

      1st Tax Year                                       $3,360

 

      2nd Tax Year                                       $5,400

 

      3rd Tax Year                                       $3,250

 

      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 2013. 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. 2013-21 TABLE 5

 

 

                    DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES

 

                         (THAT ARE NOT TRUCKS OR VANS)

 

               WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013

 

 ______________________________________________________________________________

 

 

  Fair Market Value of

 

  Passenger Automobile                      Tax Year During Lease

 

 ______________________  ______________________________________________________

 

 

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

 

 ______________________________________________________________________________

 

 

 $19,000      $19,500          2          4          6          7          8

 

  19,500       20,000          2          5          6          9          9

 

  20,000       20,500          2          5          8          9         11

 

  20,500       21,000          3          6          8         10         12

 

  21,000       21,500          3          6         10         11         13

 

  21,500       22,000          3          7         10         13         14

 

  22,000       23,000          4          8         11         14         16

 

  23,000       24,000          4          9         14         16         18

 

  24,000       25,000          5         10         15         18         21

 

  25,000       26,000          5         12         16         21         23

 

  26,000       27,000          6         12         19         23         25

 

  27,000       28,000          6         14         20         25         28

 

  28,000       29,000          7         15         22         27         30

 

  29,000       30,000          7         16         24         29         33

 

  30,000       31,000          8         17         26         31         35

 

  31,000       32,000          8         19         27         33         38

 

  32,000       33,000          9         20         29         35         40

 

  33,000       34,000         10         21         31         37         43

 

  34,000       35,000         10         22         33         39         45

 

  35,000       36,000         11         23         35         41         48

 

  36,000       37,000         11         25         36         43         50

 

  37,000       38,000         12         26         38         45         53

 

  38,000       39,000         12         27         40         47         55

 

  39,000       40,000         13         28         42         49         58

 

  40,000       41,000         13         29         44         52         59

 

  41,000       42,000         14         30         45         54         63

 

  42,000       43,000         14         32         47         56         64

 

  43,000       44,000         15         33         48         59         67

 

  44,000       45,000         15         34         51         60         69

 

  45,000       46,000         16         35         52         63         72

 

  46,000       47,000         17         36         54         65         74

 

  47,000       48,000         17         38         55         67         77

 

  48,000       49,000         18         39         57         69         79

 

  49,000       50,000         18         40         59         71         82

 

  50,000       51,000         19         41         61         73         84

 

  51,000       52,000         19         42         63         75         87

 

  52,000       53,000         20         43         65         77         89

 

  53,000       54,000         20         45         66         79         92

 

  54,000       55,000         21         46         68         81         94

 

  55,000       56,000         21         47         70         84         96

 

  56,000       57,000         22         48         72         85         99

 

  57,000       58,000         22         50         73         88        101

 

  58,000       59,000         23         51         75         90        103

 

  59,000       60,000         24         52         76         92        106

 

  60,000       62,000         24         54         79         95        110

 

  62,000       64,000         25         56         83         99        115

 

  64,000       66,000         27         58         87        103        120

 

  66,000       68,000         28         60         90        108        125

 

  68,000       70,000         29         63         93        112        130

 

  70,000       72,000         30         65         97        117        134

 

  72,000       74,000         31         68        100        121        139

 

  74,000       76,000         32         70        104        125        144

 

  76,000       78,000         33         73        107        129        149

 

  78,000       80,000         34         75        111        133        154

 

  80,000       85,000         36         79        117        141        162

 

  85,000       90,000         39         85        126        151        174

 

  90,000       95,000         41         91        135        162        186

 

  95,000      100,000         44         97        144        172        199

 

 100,000      110,000         48        106        157        188        217

 

 110,000      120,000         53        118        174        210        241

 

 120,000      130,000         59        129        193        230        266

 

 130,000      140,000         64        141        210        252        290

 

 140,000      150,000         70        153        227        273        315

 

 150,000      160,000         75        165        245        294        339

 

 160,000      170,000         80        177        263        315        363

 

 170,000      180,000         86        189        280        336        388

 

 180,000      190,000         91        201        298        357        412

 

 190,000      200,000         97        212        316        378        436

 

 200,000      210,000        102        224        333        400        461

 

 210,000      220,000        107        236        351        420        486

 

 220,000      230,000        113        248        368        442        509

 

 230,000      240,000        118        260        386        463        534

 

 240,000      And up         124        272        403        484        558

 

 

                           REV. PROC. 2013-21 TABLE 6

 

 

                       DOLLAR AMOUNTS FOR TRUCKS AND VANS

 

               WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013

 

 ______________________________________________________________________________

 

 

  Fair Market Value of

 

  Truck or Van                              Tax Year During Lease

 

 ______________________  ______________________________________________________

 

 

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

 

 ______________________________________________________________________________

 

 

  19,000       19,500          1          3          4          5          6

 

  19,500       20,000          2          3          5          6          7

 

  20,000       20,500          2          4          6          7          8

 

  20,500       21,000          2          5          7          8          9

 

  21,000       21,500          2          5          8          9         11

 

  21,500       22,000          3          6          8         10         12

 

  22,000       23,000          3          7         10         11         14

 

  23,000       24,000          4          8         11         14         16

 

  24,000       25,000          4          9         14         16         18

 

  25,000       26,000          5         10         15         18         21

 

  26,000       27,000          5         12         17         20         23

 

  27,000       28,000          6         13         18         23         25

 

  28,000       29,000          6         14         20         25         28

 

  29,000       30,000          7         15         22         27         30

 

  30,000       31,000          7         16         24         29         33

 

  31,000       32,000          8         17         26         31         35

 

  32,000       33,000          8         19         27         33         38

 

  33,000       34,000          9         20         29         35         41

 

  34,000       35,000         10         21         31         37         43

 

  35,000       36,000         10         22         33         39         46

 

  36,000       37,000         11         23         35         41         48

 

  37,000       38,000         11         25         36         43         51

 

  38,000       39,000         12         26         38         45         53

 

  39,000       40,000         12         27         40         48         55

 

  40,000       41,000         13         28         42         49         58

 

  41,000       42,000         13         29         44         52         60

 

  42,000       43,000         14         30         46         54         62

 

  43,000       44,000         14         32         47         56         65

 

  44,000       45,000         15         33         48         59         67

 

  45,000       46,000         15         34         51         60         70

 

  46,000       47,000         16         35         52         63         72

 

  47,000       48,000         17         36         54         65         74

 

  48,000       49,000         17         38         55         67         77

 

  49,000       50,000         18         39         57         69         79

 

  50,000       51,000         18         40         59         71         82

 

  51,000       52,000         19         41         61         73         84

 

  52,000       53,000         19         42         63         75         87

 

  53,000       54,000         20         43         65         77         89

 

  54,000       55,000         20         45         66         80         91

 

  55,000       56,000         21         46         68         81         94

 

  56,000       57,000         21         47         70         84         96

 

  57,000       58,000         22         48         72         86         98

 

  58,000       59,000         22         50         73         88        101

 

  59,000       60,000         23         51         75         90        103

 

  60,000       62,000         24         52         78         93        108

 

  62,000       64,000         25         55         81         97        113

 

  64,000       66,000         26         57         85        101        118

 

  66,000       68,000         27         60         88        106        122

 

  68,000       70,000         28         62         92        110        127

 

  70,000       72,000         29         64         96        114        132

 

  72,000       74,000         30         67         99        118        137

 

  74,000       76,000         31         69        103        122        142

 

  76,000       78,000         32         72        105        127        147

 

  78,000       80,000         34         73        110        131        151

 

  80,000       85,000         35         78        116        138        160

 

  85,000       90,000         38         84        124        149        172

 

  90,000       95,000         41         90        133        160        184

 

  95,000      100,000         44         95        142        171        196

 

 100,000      110,000         48        104        156        186        214

 

 110,000      120,000         53        116        173        207        240

 

 120,000      130,000         58        128        191        228        264

 

 130,000      140,000         64        140        208        249        288

 

 140,000      150,000         69        152        226        270        313

 

 150,000      160,000         75        164        243        292        336

 

 160,000      170,000         80        176        261        312        361

 

 170,000      180,000         85        188        278        334        386

 

 180,000      190,000         91        199        296        355        410

 

 190,000      200,000         96        211        314        376        434

 

 200,000      210,000        101        223        332        397        459

 

 210,000      220,000        107        235        349        418        483

 

 220,000      230,000        112        247        367        439        507

 

 230,000      240,000        118        259        384        460        532

 

 240,000      And up         123        271        401        482        556

 

 

SECTION 5. EFFECTIVE DATE

This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2013.

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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