The IRS has released the inflation-adjusted Code Sec. 280F depreciation limits for business autos, light trucks and vans placed in service by the taxpayer in 2014, as well as the annual income inclusion amounts for such vehicles first leased in 2014.
As of right now, there is no bonus depreciation for vehicles placed in service in 2014.
There are two sets of dollar limits for vehicles placed in service by the taxpayer in 2014. One is for passenger autos that are not trucks or vans and are subject to the luxury-auto limits of Code Sec. 280F (they are rated at 6,000 pounds unloaded gross vehicle weight or less).
The other is for light trucks or vans (passenger autos built on a truck chassis, including minivans and sport-utility vehicles (SUVs) built on a truck chassis) that are subject to the luxury-auto limits (they are rated at 6,000 pounds gross (loaded) vehicle weight or less).
Certain non-personal-use vehicles are exempt from the luxury auto limits regardless of their weight.
Note: Heavy SUVs—those that are built on a truck chassis and are rated at more than 6,000 pounds gross (loaded) vehicle weight—are exempt from the luxury-auto dollar caps because they fall outside of the Code Sec. 280F(d)(5) definition of a passenger auto.
The following are the annual depreciation dollar caps for vehicles that are subject to the luxury-auto limits placed in service by the taxpayer in calendar year 2014.
For an auto (not a truck or van):
- $3,160 for the placed-in-service year;
- $5,100 for the second tax year;
- $3,050 for the third tax year; and
- $1,875 for each succeeding year.
For a light truck or van:
- $3,460 for the placed-in-service year;
- $5,500 for the second tax year;
- $3,350 for the third tax year; and
- $1,975 for each succeeding year.
The dollar limits must be reduced proportionately if business/investment use of a vehicle is less than 100%.
Lease income inclusion tables. A taxpayer that leases a business auto may deduct the part of the lease payment representing business/investment use. If business/investment use is 100%, the full lease cost is deductible. However, so that lessees can’t avoid the effect of the luxury auto limits, they must include a certain amount in income during each year of the lease to partially offset the lease deduction, if the vehicle’s fair market value exceeds certain dollar limits. The income inclusion amount varies with the initial fair market value of the leased auto and the year of the lease, and is adjusted for inflation each year.
Tables 3 of Rev Proc 2014-21 carries the income inclusion tables for passenger autos with a lease term beginning in 2014 and a fair market value over $18,500. Table 4 carries the income inclusion tables for light trucks and vans with a lease term beginning in 2014 with a fair market value over $19,000.
Here is a link: http://www.irs.gov/pub/irs-drop/rp-14-21.pdf.
By Jeremy Smith, CPA
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