IRS Releases 2011 Automobile Depreciation Limits

By Alistair M. Nevius, J.D.

From the IRS

The IRS has issued the 2011 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F (Rev. Proc. 2011-21). This year, the IRS has provided the limitation amounts for vehicles placed in service in 2011 for which bonus depreciation under Sec. 168(k) applies and for those to which it does not apply.

For passenger automobiles (other than trucks or vans) placed in service during calendar 2011 to which bonus depreciation applies, the depreciation limit under Sec. 280F(d)(7) is $11,060 for the first tax year. Trucks and vans to which bonus depreciation applies have a higher limit: $11,260 for the first tax year.

For passenger automobiles (other than trucks or vans) placed in service during calendar 2011 to which bonus depreciation does not apply, the depreciation limit under Sec. 280F(d)(7) is $3,060 for the first tax year. For trucks and vans to which bonus depreciation does not apply, the limit is $3,260 for the first tax year.

Bonus depreciation does not affect the limits after the first year. For passenger automobiles the limits are $4,900 for the second tax year, $2,950 for the third tax year, and $1,775 for each successive tax year. For trucks and vans the limits are $5,200 for the second tax year, $3,150 for the third tax year, and $1,875 for each successive tax year.

The revenue procedure also provides revised tables for both automobiles and trucks and vans placed in service in 2010 for which bonus depreciation applies.

Sec. 280F(c) limits deductions for the cost of leasing automobiles, expressed as an income inclusion amount according to a formula and tables prescribed under Regs. Sec. 1.280F-7. The revenue procedure provides an updated table of the amounts to be included in income by lessees of passenger automobiles and another for trucks and vans, in both cases with lease terms that begin in calendar 2011. The revenue procedure also modifies the income inclusion amounts for 2010 by striking the first four lines in tables 3 and 4 in Rev. Proc. 2010-18.

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