IRS Issues Limitations on Depreciation Deductions by Passenger Vehicles
The Internal Revenue Service has issued Revenue Procedure 2002-14, which provides limitations on depreciation deductions for passenger automobiles first placed in service in calendar year 2002. For vehicles first put into service in 2002, full depreciation is limited to vehicles with a fair market value not exceeding $15,300. For owned vehicles, Revenue Procedure 2002-14 imposes dollar limitations on the depreciation deduction for the year the vehicle is first put into service and each succeeding year. These limitations are $3,060 in the first tax year, $4,900 in the second tax year, $2,950 in the third tax year, and $1,775 in each succeeding year. (The IRS document does not reflect the bonus depreciation allowed under the recently signed tax law. The IRS will be updating this revenue procedure to reflect the change). For leased vehicles the revenue procedure requires the lessee to include in gross income an inclusion amount equivalent to the depreciation limits imposed on owners. The IRS document includes a table of the required inclusion amounts.