IRS Issues 2012 Vehicle Depreciation Dollar Limits

by Michael W. Blitstein, CPA 

The IRS has issued limitations on depreciation deductions for owners of passenger automobiles, light trucks, and vans first placed in service during calendar year 2012.  Generally, depreciation deduction limits for calendar year 2012 are $100 more than the limits for calendar year 2011. For 2012, the depreciation dollar limits also reflect 50 percent bonus depreciation under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

The Internal Revenue Code (“The Code”) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service within its business and for each succeeding year. The IRS adjusts the amounts allowable as depreciation deductions for inflation.

The 2010 Tax Relief Act generally extended the 50 percent additional first year depreciation deduction to qualified property acquired and placed in service before January 1, 2013. The Code increases the first year depreciation allowed for vehicles subject to the luxury vehicle limits, unless the taxpayer elects out, by $8,000, to which the additional first year depreciation deduction applies. The $8,000 amount is not adjusted for inflation.

Passenger Automobiles

The maximum depreciation limits for passenger automobiles first placed in service by the taxpayer during the 2012 calendar year are:

  • $11,160 for the first tax year ($3,160 if bonus depreciation is not taken);
  • $5,100 for the second tax year;
  • $3,050 for the third tax year; and
  • $1,875 for each tax year thereafter.

Trucks and Vans

The maximum depreciation limits for trucks and vans first placed in service during the 2012 calendar year are:

  • $11,360 for the first tax year ($3,360 if bonus depreciation is not taken);
  • $5,300 for the second tax year;
  • $3,150 for the third tax year; and
  • $1,875 for each tax year thereafter.

Sport utility vehicles and pickup trucks with a gross vehicle weight rating (GVWR) in excess of 6,000 pounds are exempt from the luxury vehicle depreciation caps.

Leases

Lease payments for vehicles used for business or investment purposes are deductible in proportion to the vehicle’s business use. However, lessees must include a certain amount in income during the year the vehicle is leased to partially offset the amounts by which lease payments exceed the luxury automobile limits.

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