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IRS guidance, tables listing the luxury automobile depreciation limitations for 2012

March 2, 2012 | No. 2012-121


The IRS today released an advance copy of Rev. Proc. 2012-23, an annual revenue procedure providing:

  • The annual depreciation limitations for passenger automobiles first placed in service in calendar year 2012
  • The annual depreciation limits for trucks and vans first placed in service in 2012
  • The lease inclusion amounts for automobiles first leased in 2012 (as well as amounts for trucks and vans first leased in 2012)

For an electronic version of today’s revenue procedure (12 pages): Rev. Proc. 2012-23

Background

Section 280F(a) sets a specific annual dollar limitation (adjusted each year for inflation) on the amount of depreciation allowed for any "passenger automobile"—generally referred to as the "luxury automobile" limitations. The limitations apply to four-wheeled vehicles that are manufactured primarily for use on public streets, roads, and highways, and that are rated at 6,000 pounds gross vehicle weight (GVW) or less (except for trucks and vans, a vehicle's "unloaded" GVW rating is used).

Any depreciation disallowed because of these annual limitations is allowed in years past the end of the usual depreciation schedule, though still subject to the annual limitations.

Beginning with vehicles placed in service in 2003, there are higher annual "luxury automobile" depreciation limitations for vans and trucks than for other passenger automobiles. For this purpose, “vans and trucks” are passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles that are built on a truck chassis.

Note that there is a complete exclusion from the annual depreciation limitations for “qualified nonpersonal use vehicles” placed in service on or after July 7, 2003; these are described in regulations as vans and light trucks whose design makes them “not likely to be used more than a de minimis amount for personal purposes.”

The IRS issues annual revenue procedures providing the yearly depreciation limits for automobiles, trucks, and vans. The guidance for 2011 was provided in March 2011 as Rev. Proc. 2011-21. See TaxNewsFlash 2011-103.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (enacted December 17, 2010) extended the 50% “bonus” depreciation provisions to apply to qualified property acquired and placed in service during 2012.

 

Rev. Proc. 2012-23

For 2012, the depreciation limitations for passenger automobiles (other than trucks or vans) placed in service during 2012 for which the additional (bonus) first year depreciation deduction applies are as follows:

Passenger Automobiles: Year Placed in Service
1st tax year$11,060
2nd tax year$5,100
3rd tax year$3,050
Each succeeding tax year$1,875

The general inflation-adjusted limitations for passenger automobiles (other than trucks and vans) placed in service during 2012 are as follows:

Passenger Automobiles: Year Placed in Service
1st tax year$3,160
2nd tax year$5,100
3rd tax year $3,050
Each succeeding tax year$1,875

Separate tables are provided for trucks and vans (see below).

For an automobile being depreciated under the modified accelerated cost recovery system (MACRS)—subject to a five-year recovery period and a half-year convention—the $3,160 cap serves to limit the first-year depreciation otherwise allowed for an automobile with a basis of more than $15,800.

Trucks and Vans

The depreciation limitations for trucks or vans placed in service during 2012 for which the additional (bonus) first year depreciation deduction applies are as follows:

Trucks and Vans: Year Placed in Service
1st tax year$11,360
2nd tax year$5,300
3rd tax year $3,150
Each succeeding tax year$1,875

For trucks and vans placed in service during 2012, the general inflation-adjusted limitations are as follows:

Trucks and Vans: Year Placed in Service
1st tax year$3,360
2nd tax year$5,300
3rd tax year $3,150
Each succeeding tax year$1,875

Rev. Proc. 2012-23 will appear in Internal Revenue Bulletin 2012-14, dated April 2, 2012.

* * * * *

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

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