Words you may need to know (see Glossary):
- Placed in service
- Recovery period
For passenger automobiles, the total depreciation deduction
(including the section 179 deduction) you can claim is limited.
Passenger automobile defined.
A passenger automobile is any four-wheeled vehicle made primarily
for use on public streets, roads, and highways and rated at 6,000
pounds or less of unloaded gross vehicle weight (6,000 pounds or less
of gross vehicle weight for trucks and vans). It includes any part,
component, or other item physically attached to the automobile or
usually included in the purchase price of an automobile.
The following vehicles are not considered passenger
automobiles for these purposes.
- An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business.
- A vehicle used directly in the trade or business of transporting persons or property for pay or hire.
Maximum deductions for 2000.
Determine the maximum depreciation deduction you can claim for a
passenger automobile based on the date you place the automobile in
service. The maximum deduction for 2000, based on the year the
automobile is placed in service, is shown in the following table.
Maximum Depreciation Deduction
for Passenger Automobiles
Year Placed
in Service |
1st
Year |
2nd
Year |
3rd
Year |
4th Year and
Later |
| 2000 |
$3,060 |
$4,900 |
$2,950 |
$1,775 |
| 1999 |
5,000 |
2,950 |
1,775 |
| 1998 |
2.950 |
1,775 |
| 1997 |
1,775 |
| 1996 |
1,775 |
| 1995 |
1,775 |
| 1994 |
1,675 |
You must reduce these limits further if your business/investment
use is less than 100%.
Example.
On April 15, 2000, Virginia Hart buys a car for $10,000. She uses
the car only in her business. She files her tax return based on the
calendar year. She does not elect a section 179 deduction. Under
MACRS, a car is 5-year property. Because 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 depreciation on the car. Virginia multiplies
the unadjusted basis of her car ($10,000) by 0.20 to get her
depreciation of $2,000 for 2000. This $2,000 is below the maximum
deduction of $3,060 for passenger automobiles placed in service in
2000. She can deduct the full $2,000.
Exceptions for clean-fuel vehicles.
There are two exceptions to the depreciation limits for passenger
automobiles. These exceptions are effective after August 5, 1997, for
automobiles that run on clean fuel.
The first exception is a higher maximum depreciation
deduction for clean-fuel vehicles. The maximum deduction for 2000,
based on the year the clean fuel vehicle is placed in service, is
shown in the following table.
Maximum Depreciation Deduction
for Clean-Fuel Vehicles
Year Placed
in Service |
1st
Year |
2nd
Year |
3rd
Year |
4th Year and
Later |
| 2000 |
$9,280 |
$14,800 |
$8,850 |
$5,325 |
| 1999 |
14,900 |
8,950 |
5,325 |
| 1998 |
8,950 |
5,425 |
| 1997 |
5,425 |
The second exception is for any costs you pay to
retrofit parts and components to modify an automobile to run on clean
fuel. These costs are not subject to the limits on
depreciation for automobiles. Only the cost of the automobile
excluding this modification is subject to the limit.
For more information on clean-fuel vehicles, see chapter 12 in
Publication 535,
Business Expenses.
Proof of business/investment use.
You cannot take any depreciation or section 179 deduction for the
use of listed property (including passenger automobiles), regardless
of the date you placed the property in service, unless you can prove
business/investment use with adequate records or with sufficient
evidence to support your own statements. See What Records Must Be
Kept, later.
Fully depreciated automobile.
If you have fully depreciated a car that you are still using in
your business, you can continue to claim your other operating expenses
for the business use of your car. Continue to keep records, as
explained later.
Listed Property Worksheet
for Passenger Automobiles
To assist you in computing your maximum depreciation deduction, the
following worksheet is provided.
Worksheet for Passenger Automobiles
(Subject to Special Limits)
| Part I |
| 1. |
Description of property |
|
| 2. |
Date placed in service |
|
| 3. |
MACRS method (GDS or ADS) |
|
| 4. |
Recovery period |
|
| 5. |
Convention |
|
| 6. |
Depreciation rate (from tables) |
|
| 7. |
Deduction limit for this year from the
Maximum Depreciation Deduction for Passenger Automobiles
table |
|
| 8. |
Business/investment-use percentage |
|
| 9. |
Multiply line 7 by line 8. This is your
adjusted deduction limit |
| |
| 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 (reduced by any section
179A deduction* or credit for electric vehicles**) |
|
| 13. |
Multiply line 12 by line 8. This is your
business/investment cost |
|
| 14. |
Section 179 deduction claimed in year you
placed the car in service |
|
| 15. |
Subtract line 14 from line 13. This is your
unadjusted basis for depreciation |
|
| 16. |
Multiply line 15 by line 6. This is your
maximum depreciation deduction |
| |
| 17. |
Enter the lesser of line 11 or line 16. This is
your depreciation deduction |
| |
| *The section 179A deduction is for
clean-fuel vehicles or clean-fuel vehicle refueling property. 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. |
| **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. |
The following example shows how to figure your maximum deduction
using the worksheet.
Example.
On September 26, 2000, Donald Banks bought a car for $18,000. He
used the car 60% for business during 2000. 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. The
unadjusted basis of his car is $9,800, [($18,000 x 60%)
- $1,000]. He multiplies his unadjusted basis ($9,800) by
the rate in Table A-1 (0.20) to get his tentative depreciation
deduction of $1,960. Because he used the passenger automobile only 60%
for business, his depreciation deduction (including the section 179
deduction) is limited to $1,836 ($3,060 x 60%). Because Donald
is claiming a section 179 deduction of $1,000 in 2000, his
depreciation deduction is limited to $836.
Worksheet for Passenger Automobiles
(Subject to Special Limits)
| Part I |
| 1. |
Description of property |
Automobile |
| 2. |
Date placed in service |
9/26/00 |
| 3. |
MACRS method (GDS or ADS) |
GDS |
| 4. |
Recovery period |
5-Year |
| 5. |
Convention |
Half-Year |
| 6. |
Depreciation rate (from tables) |
.20 |
| 7. |
Deduction limit for this year from the
Maximum Depreciation Deduction for Passenger Automobiles
table |
$3,060 |
| 8. |
Business/investment-use percentage |
60% |
| 9. |
Multiply line 7 by line 8. This is your
adjusted deduction limit |
| $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 (reduced by any section
179A deduction* or credit for electric vehicles**) |
$18,000 |
| 13. |
Multiply line 12 by line 8. This is your
business/investment cost |
$10,800 |
| 14. |
Section 179 deduction claimed in year you
placed the car in service |
$1,000 |
| 15. |
Subtract line 14 from line 13. This is your
unadjusted basis for depreciation |
$9,800 |
| 16. |
Multiply line 15 by line 6. This is your
maximum depreciation deduction |
| $1,960 |
| 17. |
Enter the lesser of line 11 or line 16. This is
your depreciation deduction |
| $836 |
| *The section 179A deduction is for
clean-fuel vehicles or clean-fuel vehicle refueling property. 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. |
| **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. |
For a detailed discussion of passenger automobiles, including leased passenger automobiles, see Publication 463.
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