If you purchased a car after September 10, 2001, for use in your business (or as an employee) and figure your deductible expenses using the actual car expense method, new law contains provisions that may affect your depreciation deduction for that car.

Publication 463, Travel, Entertainment, Gift, and Car Expenses, contains information on figuring depreciation on your car. However, Publication 463 does not contain the new provisions because it was printed before the law was enacted. The new provisions are in the Supplement to Publication 463, which is reprinted below.

This supplemental publication is for taxpayers who purchased a car for business purposes after September 10, 2001, and figure their deductible expenses, including a deduction for depreciation, using the actual car expense method.

After Publication 463 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Certain provisions of this new law may reduce your taxes for 2001. The new law contains the following provisions.

If you have already filed your 2001 return, you may wish to file an amended return to claim any of these benefits. See Amended Return, later.

If you used the actual car expense method to figure your deduction for a car you own and use in your business (or as an employee), you generally can claim a depreciation deduction. However, there is a limit on the depreciation deduction you can take for your car each year. See Depreciation Limit later.

If you filed your 2001 calendar year return before June 1, 2002, and did not claim the new special depreciation allowance for a qualified car, you can claim it by filing an amended return on Form 1040X, Amended U.S. Individual Income Tax Return, by April 15, 2003. At the top of the Form 1040X, print “Filed pursuant to Revenue Procedure 2002–33.” If you are an employee, attach Form 2106, Employee Business Expenses (revised March 2002). If you are self-employed, attach Form 4562, Depreciation and Amortization (revised March 2002).

Or, you can claim the special depreciation allowance by filing Form 3115, Application for Change in Accounting Method, with your 2002 return. For details, see Revenue Procedure 2002–33. (But, filing Form 1040X for 2001 enables you to claim the special allowance earlier than attaching Form 3115 to your 2002 return.)

You cannot claim the special depreciation allowance on an amended return (or by using Form 3115) if you made, or are treated as having made, the election not to claim it described later.

You can elect not to claim the special depreciation allowance for a car by making a statement attached to, or written on, your return indicating that you are electing not to claim the special depreciation allowance for 5-year property. As a general rule, you must make this election by the due date (including extensions) of your return.

You can have an automatic extension of 6 months from the due date of your return (excluding extensions) to make the election with an amended return. To get this extension, you must have filed your original return by the due date (including extensions). At the top of the statement, print “Filed pursuant to section 301.9100–2.”

If you elect not to claim the special depreciation allowance for a car, you cannot claim it for any other 5-year property placed in service during the same year.

Unless you elect (or are treated as electing) not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed.