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previous page Previous Page: Publication 946 - How to Depreciate Property - What Is the Business-Use Requirement?
next page Next Page: Publication 946 - How to Depreciate Property - What Records Must Be Kept?
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p946-032.htm#en_us_publink1000107703

Do the Passenger Automobile Limits Apply?(p68)


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Words you may need to know (see Glossary)

The depreciation deduction, including the section 179 deduction, you can claim for a passenger automobile (defined earlier) each year is limited.
This section describes the maximum depreciation deduction amounts for 2008 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit.
taxmap/pubs/p946-032.htm#en_us_publink1000107704

Exception for leased cars.(p68)


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The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property, earlier, under What Is the Business-Use Requirement.
taxmap/pubs/p946-032.htm#en_us_publink1000107705

Maximum Depreciation Deduction(p68)


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previous topic occurrence Depreciation next topic occurrence

The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. They are based on the date you placed the automobile in service.
taxmap/pubs/p946-032.htm#en_us_publink1000107706

Passenger Automobiles(p68)


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previous topic occurrence Automobile next topic occurrence

The maximum deduction amounts for most passenger automobiles are shown in the following table.
Maximum Depreciation Deduction
for Passenger Automobiles
Date   4th & 
Placed1st 2nd 3rd Later 
 In ServiceYear Year Year Years 
2008$10,9601   $4,800$2,850$1,775 
2007  3,0604,9002,8501,775 
2006  2,9604,8002,8501,775 
2005  2,9604,7002,8501,675 
2004 10,61024,8002,8501,675 
5/06/2003–
12/31/2003
 10,71034,9002,9501,775 
1/01/2003–
5/05/2003
  7,66044,9002,9501,775 
2002  7,66044,9002,9501,775 
2001  7,66054,9002,9501,775 
20003,060 4,9002,9501,775 
19993,060 5,0002,9501,775 
19983,160 5,0002,9501,775 
19973,160 5,0003,0501,775 
1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960.
2If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960.
3If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060.
4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060.
5 If you acquired the vehicle before 9/11/01, you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060.
EIC
If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year.
EIC
If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12.
taxmap/pubs/p946-032.htm#en_us_publink1000107709

Example.(p69)

On April 15, 2008, Virginia Hart bought and placed in service a new car for $14,500. She used the car only in her business. She files her tax return based on the calendar year. She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Under MACRS, a car is 5-year property. Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Virginia multiplies the $14,500 unadjusted basis of her car by 0.20 to get her MACRS depreciation of $2,900 for 2008. This $2,900 is below the maximum depreciation deduction of $2,960 for passenger automobiles placed in service in 2008. She can deduct the full $2,900.
taxmap/pubs/p946-032.htm#en_us_publink1000107710

Electric Vehicles(p69)


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Electric Vehicles

The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts on page 68 for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts on page 70 for electric vehicles classified as trucks and vans.
Maximum Depreciation Deduction
For Electric Vehicles
Date   4th &
Placed1st 2nd 3rd Later
In ServiceYear Year Year Years
2006 $8,980$14,400$8,650$5,225
2005  8,88014,2008,4505,125
2004 31,830114,3008,5505,125
5/06/2003–
12/31/2003
 32,030214,6008,7505,225
1/01/2003–
5/05/2003
 22,880314,6008,7505,225
2002 22,980414,7008,7505,325
2001 23,080514,8008,8505,325
2000  9,28014,8008,8505,325
1999  9,28014,9008,9505,325
1998  9,38015,0008,9505,425
1997  9,48015,1009,0505,425
1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880.
2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080.
3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080.
4 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,180.
5 If you acquired the vehicle before 9/11/01, you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,280.
taxmap/pubs/p946-032.htm#en_us_publink1000107711

Trucks and Vans(p70)


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Trucks and Vans

The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. The maximum deduction amounts for trucks and vans are shown in the following table.
Maximum Depreciation Deduction
For Trucks and Vans
Date   4th &
Placed1st2nd3rdLater
In ServiceYearYearYearYears
2008$11,1601$5,100$3,050$1,875
20073,2605,2003,0501,875
20063,2605,2003,1501,875
20053,2605,2003,1501,875
200410,9102 5,3003,1501,875
5/06/2003–
12/31/2003
11,01035,4003,2501,975
1/01/2003–
5/05/2003
7,96045,4003,2501,975
1If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, the maximum deduction is $3,160.
2If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,260.
3 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360.
4 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360.
taxmap/pubs/p946-032.htm#en_us_publink1000107712

Depreciation Worksheet for  
Passenger Automobiles(p70)


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Depreciation Worksheet for Passenger Automobiles

You can use the following worksheet to figure your depreciation deduction using the percentage tables. Then use the information from this worksheet to prepare Form 4562. taxmap/pubs/p946-032.htm#w13081f45
Pencil
Depreciation Worksheet for
Passenger Automobiles
Part I
1.MACRS system (GDS or ADS)            
2.Property class            
3.Date placed in service            
4.Recovery period            
5.Method and convention            
6.Depreciation rate (from tables)            
7.Maximum depreciation deduction for this year from the appropriate table             
8.Business/investment-use percentage             
9.Multiply line 7 by line 8. This is your adjusted maximum depreciation deduction             
10.Section 179 deduction claimed this year (not more than line 9). Enter -0- if this is not the year you placed the car in service.             
 Note.
1) If line 10 is equal to line 9, stop here. Your combined section 179 and depreciation deduction is limited to the amount on line 9.
2) If line 10 is less than line 9, complete Part II.
Part II
11.Subtract line 10 from line 9. This is the maximum amount you can deduct for depreciation             
12.Cost or other basis              
13.Multiply line 12 by line 8. This is your business/investment cost             
14.Section 179 deduction and any special depreciation allowance claimed in the year you placed the car in service             
15.Subtract line 14 from line 13. This is your basis for depreciation             
16.Multiply line 15 by line 6. This is your tentative MACRS depreciation deduction             
17.Enter the lesser of line 11 or
line 16. This is your MACRS depreciation deduction
             
The following example shows how to figure your depreciation deduction using the worksheet.
taxmap/pubs/p946-032.htm#en_us_publink1000107713

Example.(p70)

On September 26, 2008, Donald Banks bought and placed in service a new car for $18,000. He used the car 60% for business during 2008. He files his tax return based on the calendar year. Under GDS, his car is 5-year property. Donald is electing a section 179 deduction of $1,000 on the car. Also, the car does not qualify for any special depreciation allowance. He uses Table A-1 to determine the depreciation rate. Donald's MACRS depreciation deduction is limited to $836, as shown in the following worksheet. taxmap/pubs/p946-032.htm#w13081f06
Pencil
Depreciation Worksheet for
Passenger Automobiles
Part I
1.MACRS system (GDS or ADS)GDS
2.Property class5-year
3.Date placed in service9/26/08
4.Recovery period5-Year
5.Method and convention200% DB/Half-Year
6.Depreciation rate (from tables).20
7.Maximum depreciation deduction for this year from the appropriate table$3,060 
8.Business/investment-use percentage60% 
9.Multiply line 7 by line 8. This is your adjusted maximum depreciation deduction $1,836
10.Section 179 deduction claimed this year (not more than line 9). Enter -0- if this is not the year you placed the car in service. $1,000
 Note.
1) If line 10 is equal to line 9, stop here. Your combined section 179 and depreciation deduction is limited to the amount on line 9.
2) If line 10 is less than line 9, complete Part II.
Part II
11.Subtract line 10 from line 9. This is the maximum amount you can deduct for depreciation $836
12.Cost or other basis $18,000 
13.Multiply line 12 by line 8. This is your business/investment cost$10,800 
14.Section 179 deduction and any special depreciation allowance claimed in year you placed the car in service$1,000 
15.Subtract line 14 from line 13. This is your basis for depreciation$9,800 
16.Multiply line 15 by line 6. This is your tentative MACRS depreciation deduction $1,960
17.Enter the lesser of line 11 or
line 16. This is your MACRS depreciation deduction
 $836
taxmap/pubs/p946-032.htm#en_us_publink1000107714

Deductions After the 
Recovery Period(p71)


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Deductions After the Recovery Period

If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. See Maximum Depreciation Deduction, earlier.
Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied.
EIC
You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period.
taxmap/pubs/p946-032.htm#en_us_publink1000107716

Example.(p71)

In May 2002, you bought and placed in service a car costing $31,500. The car was 5-year property under GDS (MACRS). You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. You used the car exclusively for business during the recovery period (2002 through 2007). You figured your depreciation as shown below.
YearPercentageAmountLimit Allowed
2002 20.0%$6,300$3,060 $3,060
2003 32.0 10,080 4,900  4,900
2004 19.2 6,048 2,950 2,950
2005 11.52 3,629 1,775 1,775
2006 11.52 3,629 1,775 1,775
2007 5.76 1,814 1,775 1,775
Total $16,235
At the end of 2007, you had an unrecovered basis of $15,265 ($31,500 − $16,235). If in 2008 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,775 or your remaining unrecovered basis.
If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,741 ($16,235 × 60%), but you still would have to reduce your basis by $16,235 to determine your unrecovered basis.
taxmap/pubs/p946-032.htm#en_us_publink1000107717

Deductions For Passenger Automobiles Acquired in a Trade-in(p71)


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Deductions For Passenger Automobiles Acquired in a Trade-in

If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. If the automobile acquired in the trade-in is qualified GO Zone property, the carryover basis is eligible for a special depreciation allowance. See Qualified Gulf Opportunity Zone Property in chapter 3. Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. This excess basis is the additional cash paid for the new automobile in the trade-in.
The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Special rules apply in determining the passenger automobile limits. These rules and examples are discussed in section 1.168(i)-6(d)(3) of the regulations.
Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1.168(i)-6(i) and 1.168(i)-6(j) of the regulations.
previous pagePrevious Page: Publication 946 - How to Depreciate Property - What Is the Business-Use Requirement?
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