The Car and Truck Fleet and Leasing Management Magazine

IRS Issues Vehicle Depreciation Requirements

April 19, 2004

The Internal Revenue Service has issued Revenue Procedure 2004-20, which provides limitations on depreciation deductions for passenger vehicles first placed in service in calendar year 2004, according to the National Association of Fleet Administrators (NAFA). The IRS notice makes significant reductions in vehicle values from 2003.

The document includes:

(1) Limitations on depreciation deductions on passenger vehicles first placed in service in calendar year 2004, including special tables of limitations on depreciation deductions for trucks and vans.

(2) The amounts to be included in income by lessees of passenger automobiles first leased during calendar year 2004, including a separate table of inclusion amounts for lessees of trucks and vans.

(3) The maximum allowable value of employer-provided passenger automobiles first made available to employees for personal use in calendar year 2004 for which the vehicle cents-per-mile valuation rule applies.

For automobiles the depreciation limitations are $2,960 in the first tax year, $4,800 in the second tax year, $2,850 in the third tax year and $1,675 in each succeeding year. For trucks and vans, the limitations are $3,260 in the first tax year, $5,300 in the second tax year, $3,150 in the third tax year and $1,875 in each succeeding year. These limitations are equivalent to an automobile with a fair market value of $14,800 and a truck or van value of $16,300, according to NAFA.The Revenue Procedure provides that the cents-per-mile valuation rule may be used if the fair market value of the automobile first put into service in 2004 does not exceed 14,800. This is a $400 reduction from 2003, according to NAFA. The Revenue Procedure also sets the fair market value for vehicles that can be included when using the fleet-average rule for calculating the Annual Lease Value of vehicles in the fleet. For 2004, the values are $19,700 for automobiles and $21,600 for trucks. The text of Revenue Procedure 2004-20 is available at www.irs.gov/irb/2004-13_IRB/ar09.html.

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