The IRS has released the inflation-adjusted limitations on depreciation deductions for business-use passenger automobiles, light trucks, and vans first placed in service during calendar year 2017. All limitations are inflation-adjusted based upon October 2016 CPI amounts, with rounding conventions that account for almost all 2016 limits remaining the same for 2017 (only the third-year limitation for light trucks and vans rose, from $3,350 to $3,450 in 2017).
Comment. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) has allowed for 50 percent bonus depreciation where applicable through 2017. For both passenger automobiles and light trucks and vans, that amount raises first-year depreciation by $8,000. The bonus rate is scheduled to drop to 40 percent for property placed in service in 2018 and to 30 percent for 2019, before sunsetting entirely unless changed by Congress.
For passenger automobiles that are not trucks and vans first placed in service in 2017, the depreciation limitations under Code Sec. 280F for the first three years are $3,160 ($11,160 with additional first-year depreciation), $5,100, and $3,050, respectively, and $1,875 for each succeeding year. For trucks and vans, the 2017 maximum deduction limits under Code Sec. 280F for the first three tax years are $3,560 ($11,560, with additional first-year depreciation), $5,700, and $3,450, respectively for years two and three, and $2,075 for each succeeding year. Lease inclusion tables for vehicles first leased in 2017 are provided with the applicable inclusion amounts.
Code Sec. 280F provides that lease payments for vehicles used for business or investment purposes are deductible in proportion to the vehicles’ business use. Lessees must include a certain amount in income during the year the vehicle is leased to partially offset the amounts that the lease payments exceed the luxury automobile limits. Rev. Proc. 2017-29 includes tables identifying the income inclusion amounts for passenger automobiles starting at $19,000, and for trucks and vans starting at $19,500 (with both tables topping out at a $240,000 value), in connection with lease terms beginning in calendar year 2017.
Citation: Rev. Proc. 2017-29