Publication 946
Introductory Material

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Addition of 50% special depreciation allowance. For qualified property you acquire after May 5, 2003, and place in service in 2003, you can take a special depreciation allowance that is equal to 50% of the property's depreciable basis. However, you can elect to claim the 30% special allowance for property that qualifies for the 50% rate. See chapter 3, Claiming the Special Depreciation Allowance (or Liberty Zone Depreciation Allowance).

Increased section 179 deduction dollar limit. The maximum section 179 expense you can elect to deduct for property you placed in service in tax years beginning in 2003 has increased from $24,000 to $100,000. See Dollar Limit under How Much Can You Deduct? in chapter 2.

Increased threshold for figuring any reduction in the dollar limit. The $200,000 threshold amount used to figure any reduction in the maximum section 179 deduction you can elect for property placed in service in tax years beginning in 2003 has increased to $400,000. See Reduced Dollar Limit for Cost Exceeding $400,000 under How Much Can You Deduct? in chapter 2.

Inclusion of off-the-shelf computer software as eligible section 179 property. Off-the-shelf computer software placed in service in 2003 qualifies for the section 179 deduction. See Off-the-shelf computer software in the discussion on eligible property under What Property Qualifies? in chapter 2.

Revocability of the section 179 deduction. You can revoke an election (or any specification made in the election) to take a section 179 deduction for any property without IRS approval. The revocation can be made on an amended return and applies to elections and specifications made on tax returns for tax years beginning in 2003.

Exclusion of qualified nonpersonal use trucks and vans from definition of passenger automobile. A truck or van that is a qualified nonpersonal use vehicle placed in service after July 6, 2003, is not considered to be a passenger automobile (and is therefore not subject to the passenger automobile limits). See Qualified nonpersonal use vehicles under Passenger Automobiles in chapter 5 for a definition of qualified nonpersonal use vehicles.

Depreciation limits on business vehicles. The total section 179 deduction and depreciation (including the special depreciation allowance) you can take for a passenger automobile (that is not an electric vehicle or a truck or van) you use in your business and first place in service in 2003 is generally $10,710 for a car acquired after May 5, 2003, and $7,660 for a car acquired before May 6, 2003. The maximum deduction for an electric vehicle that you first place in service in 2003 is generally $32,030 for a car acquired after May 5, 2003, and $22,880 for a car acquired before May 6, 2003. For the maximum depreciation you can deduct in later years, see Maximum Depreciation Deduction in chapter 5.

Depreciation limits on trucks and vans. Maximum depreciation deductions have been established for passenger automobiles (such as minivans and sport utility vehicles) that are built on a truck chassis and are placed in service in 2003. These limits are generally higher than those for other automobiles. The total section 179 deduction and depreciation (including the special depreciation allowance) you can take for a truck or van you use in your business and first place in service in 2003 is generally $11,010 for a vehicle acquired after May 5, 2003, and $7,960 for a vehicle acquired before May 6, 2003. For the maximum depreciation you can deduct in later years, see Maximum Depreciation Deduction in chapter 5.

Eligibility of carried-over basis for special depreciation allowance. If you acquire qualified property in a like-kind exchange or involuntary conversion, the carried-over basis of the acquired property is eligible for a special depreciation allowance. See Like-kind exchanges and involuntary conversions under How Much Can You Deduct? in chapter 3.

Important Reminder

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1–800–THE–LOST (1–800–843–5678) if you recognize a child.

Introduction

This publication explains how you can recover the cost of business or income-producing property through deductions for depreciation (the special depreciation allowance, the special Liberty Zone depreciation allowance, and deductions under the Modified Accelerated Cost Recovery System). It also explains how you can elect to take a section 179 deduction, instead of depreciation deductions, for certain property and the additional rules for listed property. In addition, the publication describes how to figure depreciation and how to fill out Form 4562, Depreciation and Amortization.

The depreciation methods discussed in this publication generally do not apply to property placed in service before 1987. If you want information about depreciating such property, see Publication 534.

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