Depreciation and Section 179 Deduction
Depreciation limits on business cars. The
total section 179 deduction and depreciation you can take on a car you
use in your business and first place in service in 1998 cannot exceed $3,160.
Your depreciation cannot exceed $5,000 for the second year of recovery,
$2,950 for the third year of recovery, and $1,775 for each later tax year.
Exceptions for clean-fuel cars. There
are two exceptions to the depreciation limits.
- The first exception is for a car that was produced to run primarily
on electricity and that you place in service in 1998. For this type of
car the depreciation limit is increased as shown below.
a) $9,380 for the first year of recovery.
b) $15,000 for the second year of recovery.
c) $8,950 for the third year of recovery.
d) $5,425 for each later tax year.
- The second exception is for costs you pay to retrofit parts and
components to modify a car to run on clean fuel. These costs are not subject
to the limits on depreciation for cars. Only the cost of the car excluding
this modification is subject to the limit. This exception applies to modifications
you place in service after August 5, 1997.
For more information on clean-fuel vehicles, see chapter 15 in Publication 535.
Increases to section 179 deduction.
The total cost of section 179 property that you can elect to deduct for
1998 is increased from $18,000 to $18,500. For tax years after 1998, this
amount increases as shown below.
| Tax Year |
Maximum Deduction |
| 1999................................ |
$19,000 |
| 2000................................ |
20,000 |
| 2001 and 2002................ |
24,000 |
| After 2002...................... |
25,000 |
For more information on the section 179 deduction, see chapter 2
in Publication 946, How To Depreciate
Property.
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