Depreciatioin Dollar Limits for 2013 Business Autos, Light Trucks and Van

IRS has released the inflation-adjusted Code Sec. 280F depreciation limits for business autos, light trucks and vans (including minivans) placed in service by the taxpayer in 2013, as well as the annual income inclusion amounts for such vehicles first leased in 2013. Depreciation deduction limits for 2013 are the same as in 2012 for a passenger auto, while the limits (other than the first year limits which are the same) are $100 higher for a light truck or van. The new income inclusion tables require smaller income inclusion amounts for vehicles first leased by the taxpayer in 2013.

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 2013, and otherwise eligible for bonus depreciation. Under the American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act, P.L. 112-240), new assets generally acquired and placed in service after Dec. 31, 2007, and before Jan. 1, 2014, 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 2013 is increased by $8,000. (Code Sec. 168(k)(2)(F)(i))

Year-by-year limits for 2013. There are four sets of dollar limits for vehicles placed in service by the taxpayer in 2013. 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 2013.

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.

If the bonus depreciation rules don’t apply to a light truck or van (passenger auto built on a truck chassis, including minivan and sport-utility vehicle (SUV) built on a truck chassis):

  • $3,360 for the placed in service year;
  • $5,400 for the second tax year;
  • $3,250 for the third tax year; and
  • $1,975 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;
  • $5,400 for the second tax year;
  • $3,250 for the third tax year; and
  • $1,975 for each succeeding year.

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. 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.

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