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Publication 946
taxmap/pubs/p946-032.htm#en_us_publink1000107703

Do the Passenger Automobile Limits Apply?(p65)

rule

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 2010 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.(p65)

rule
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(p65)

rule
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(p65)

rule
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 
2010$11,0601   $4,900$2,950$1,775
200910,96024,8002,8501,775
200810,9602   4,8002,8501,775 
2007  3,0604,9002,8501,775 
2006  2,9604,8002,8501,775 
2005  2,9604,7002,8501,675 
2004 10,61034,8002,8501,675 
5/06/2003–
12/31/2003
 10,71044,9002,9501,775 
1/01/2003–
5/05/2003
  7,66054,9002,9501,775 
2002  7,66054,9002,9501,775 
2001  7,66064,9002,9501,775 
20003,060 4,9002,9501,775 
1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060.
2If 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.
3If 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.
4If 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.
5If 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.
6 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.(p66)

On April 15, 2010, 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 2010. This $2,900 is below the maximum depreciation deduction of $3,060 for passenger automobiles placed in service in 2010. She can deduct the full $2,900.
taxmap/pubs/p946-032.htm#en_us_publink1000107710

Electric Vehicles(p66)

rule
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 65 for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans on page 67, 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
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(p67)

rule
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
2010$11,1601$5,100$3,050$1,875
200911,06024,9002,9501,775
200811,16035,1003,0501,875
20073,2605,2003,0501,875
20063,2605,2003,1501,875
20053,2605,2003,1501,875
200410,9104 5,3003,1501,875
5/06/2003–
12/31/2003
11,01055,4003,2501,975
1/01/2003–
5/05/2003
7,96065,4003,2501,975
1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160.
2 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060.
3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160.
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, or the maximum deduction is $3,260.
5 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.
6 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(p67)

rule
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#en_us_publink1000252383
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 (including your special depreciation allowance) 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 limit on the amount you can deduct for depreciation (including any special depreciation allowance )  
 12.Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)  
 13.Multiply line 12 by line 8. This is your business/investment cost 
 14.Section 179 deduction claimed in the year you placed the car in service 
 15.Subtract line 14 from line 13. This is your tentative basis for depreciation 
 16.Multiply line 15 by .50 if the 50% special depreciation allowance applies. Multiply line 15 by 1.00 if the 100% special depreciation allowance applies. This is your special depreciation allowance. Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance  
 Note
1) If line 16 is equal to line 11, stop here. Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11.
2) If line 16 is less than line 11, complete Part III.
 Part III
 17.Subtract line 16 from 11. This is the limit on the amount you can deduct for MACRS depreciation 
 18.Subtract line 16 from line 15. This is your basis for depreciation. 
 19.Multiply line 18 by line 6. This is your tentative MACRS depreciation deduction. 
 20.Enter the lesser of line 17 or line 19. This is your MACRS depreciation deduction. 
1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car.
2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount.
 
     
taxmap/pubs/p946-032.htm#en_us_publink1000107714

Deductions After the 
Recovery Period(p68)

rule
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.(p68)

In May 2004, 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 (2004 through 2009). You figured your depreciation as shown below.
YearPercentageAmountLimit Allowed
2004 20.0%$6,300$2,960 $2,960
2005 32.0 10,080 4,800  4,800
2006 19.2 6,048 2,850 2,850
2007 11.52 3,629 1,675 1,675
2008 11.52 3,629 1,675 1,675
2009 5.76 1,814 1,675 1,675
Total $15,635
At the end of 2009, you had an unrecovered basis of $15,865 ($31,500 − $15,635). If in 2010 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 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 $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis.
taxmap/pubs/p946-032.htm#en_us_publink1000107717

Deductions For Passenger Automobiles Acquired in a Trade-in(p68)

rule
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.