Vehicle (cars, trucks and vans) depreciation limits for 2012 released by IRS by Jeffrey Brooks, CPA

Vehicle (cars, trucks and vans) depreciation limits for 2012 released by IRS by Jeff Brooks CPA

Most depreciation deduction limits are $100 higher than those that applied for 2011. The new income inclusion tables require smaller income inclusion amounts for vehicles first leased by the taxpayer in 2012.
Recent legislation’s effect on luxury auto limits. First-year luxury auto dollar limits are enhanced for new vehicles bought and placed in service in 2012, and otherwise eligible for bonus depreciation. Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act, P.L. 111-312), new assets generally acquired and placed in service after Dec. 31, 2011, and before Jan. 1, 2013, are eligible for 50% bonus first-year depreciation. Unless a taxpayer elects out, for autos, light duty trucks or vans that are subject to the Code Sec. 280F luxury-auto limits, and are qualified property under the bonus depreciation rules of Code Sec. 168(k), the regular first-year dollar limit for eligible vehicles bought and placed in service in 2012 is increased by $8,000. (Code Sec. 168(k)(2)(F)(i))
Year-by-year limits for 2012. There are four sets of dollar limits for vehicles placed in service by the taxpayer in 2012. Two are 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). One set of limits applies to autos for which the bonus depreciation rules don’t apply under Code Sec. 168(k) (the auto is pre-owned or not used more than 50% for business, the taxpayer elects out of Code Sec. 168(k) or elects to increase its Code Sec. 53 alternative minimum tax (AMT) credit limit instead of claiming bonus first year depreciation); the other set of limits applies to autos for which the bonus depreciation rules do apply.
There also are two sets of limits 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). (Code Sec. 280F(d)(5)(A)) One set of limits applies to light trucks and vans for which the bonus depreciation rules don’t apply under Code Sec. 168(k); the other set of limits applies to light trucks and vans for which the bonus depreciation rules do apply. Certain non-personal-use vehicles are exempt from the luxury auto limits regardless of their weight.
The following are the annual depreciation dollar caps for vehicles that are subject to the luxury-auto limits of Code Sec. 280F and placed in service by the taxpayer in calendar year 2012.
If the bonus first year depreciation rules don’t apply to 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.
If the bonus depreciation rules do apply to an auto (not a truck or van):
• $11,160 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.
• $3,360 for the placed in service year;
• $5,300 for the second tax year;
• $3,150 for the third tax year; and
• $1,875 for each succeeding year.
If the bonus depreciation rules do apply to a light truck or van:
• $11,360 for the placed in service year;
• $5,300 for the second tax year;
• $3,150 for the third tax year; and
• $1,875 for each succeeding year.
For a light truck or van placed in service in 2012, the dollar figures for the first and second tax years are $100 higher than those that applied for such vehicles first placed in service in 2011. The figures for succeeding tax years remain the same as for last year.

WARNING! The dollar limits must be reduced proportionately if business/investment use of a vehicle is less than 100%.

6000 pound rule still will get you big deductions because these vehicles are not considered “luxury vehicles”.

Lease income inclusion tables. If you lease a business vehicle you may deduct the part of the lease payment representing business/investment use. If business/investment use is 100%, the full lease cost is deductible. So that lessees can’t avoid the effect of the luxury auto limits, however, 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. (Code Sec. 280F(c)) 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 5 and 6 of Rev Proc 2012-23, carry the income inclusion tables for passenger autos with with a lease term beginning in 2012 and a fair market value over $18,500, and light trucks and vans with a lease term beginning in 2012 with a fair market value over $19,000.

Warning: The income inclusion amounts for vehicles first leased this year are lower than they were for vehicles first leased last year. For example, for an auto with a fair market value over $37,000 but not over $38,000, and first leased in 2012, the income inclusion amounts are $13 for the first tax year during the lease, $28 for the second tax year, $41 for the third, $49 for the fourth, and $57 for the fifth and later lease years. If the same auto was first leased in 2011, the income inclusion amounts are $22 for the first tax year during the lease, $49 for the second tax year, $73 for the third, $87 for the fourth, and $100 for the fifth and later lease years.

Jeff Brooks

If you enjoyed this article, please consider sharing it!
Icon Icon Icon
RSS FEED

Search

No Obligation FREE Evaluation: Guaranteed to Reduce Your Taxes

602-292-2009

Name:*

Email:*

Company:

Comments:

Security Code:
captcha
Please enter the code shown above:

About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

Get In Touch

JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com