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2015 Inflation-Adjusted Vehicle Depreciation

03.05.2015

OLYMPUS DIGITAL CAMERAThe IRS has released the inflation-adjusted limitations on depreciation deductions for business-use passenger automobiles, light trucks, and vans first placed in service during calendar year 2015. The IRS also modified the 2014 limitations to reflect passage of the Tax Increase Prevention Act of 2014 late last year.

Legislation

At the end of 2014, Congress extended bonus depreciation to the 2014 tax year in the case of passenger vehicles. Congress has not, however, done the same for passenger vehicles placed in service during 2015. This means that although several of the 2015 limits have been adjusted upward for inflation, the total amount a taxpayer may deduct for a vehicle placed in service during 2015 will be effectively $8,000 lower than for a vehicle placed in service during 2014, unless Congress again provides retroactive relief this year.

Dollar limits

Code Sec. 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the vehicle in service in its business, and for each succeeding year. Under Code Sec. 280F(d)(7), the IRS adjusts for inflation the amounts allowable for depreciation deductions. In Rev. Proc. 2015-19, the IRS has provided depreciation limits for passenger automobiles, light trucks and vans.

Passenger automobiles

The maximum depreciation limits under Code Sec. 280F for passenger automobiles first placed in service during the 2015 calendar year are:

  • $3,160 for the first tax year;
  • $5,100 for the second tax year;
  • $3,050 for the third tax year; and
  • $1,875 for each succeeding tax year.

Trucks and vans

The maximum depreciation limits under Code Sec. 280F for trucks and vans first placed in service during the 2015 calendar year are:

  • $3,460 for the first tax year;
  • $5,600 for the second tax year;
  • $3,350 for the third tax year; and
  • $1,975 for each succeeding tax year.

SUVs and pickup trucks with a gross vehicle weight rating (GVWR) in excess of 6,000 pounds continue to be exempt from the luxury vehicle depreciation caps based on a loophole in the operative definition. Congress in 2004 placed a $25,000 limit on Code Sec. 179 expensing of heavy SUVs but has not extended it to Code Sec. 280F.

Leases

Lease payments for vehicles used for business or investment purposes are deductible in proportion to the vehicles' business use. However, lessees must include a certain amount in income during the year that the vehicle is leased, to partially offset the amounts by which the lease payments exceed the luxury automobile limits. Rev. Proc. 2015-19 includes tables that identify the income inclusion amounts for passenger automobiles, trucks and vans with lease terms that begin in calendar year 2015.

Hemmann_Darla (3)For more information, contact your Brown Smith Wallace tax advisor, or Darla Hemmann, at 314.983.1203 or dhemmann@bswllc.com.

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