IRS has released the inflation-adjusted Code Sec. 280F depreciation limits for business autos, light trucks and vans (including minivans) placed in service by the taxpayer in 2017, as well as the annual income inclusion amounts for such vehicles first leased in 2017.
Year-by-year limits for 2017. There are four sets of dollar limits for vehicles placed in service by the taxpayer in 2017. Two are for passenger autos that are not trucks or vans and are subject to the luxury-auto limits of Code Sec. 280F (they are rated at 6,000 pounds unloaded gross vehicle weight or less). One set of limits applies to autos for which the bonus depreciation rules don’t apply under Code Sec. 168(k) (the auto is pre-owned or not used more than 50% for business, the taxpayer elects out of Code Sec. 168(k) or elects to increase its Code Sec. 53 alternative minimum tax (AMT) credit limit instead of claiming bonus first year depreciation); the other set of limits applies to autos for which the bonus depreciation rules do apply.
There also are two sets of limits for light trucks or vans (passenger autos built on a truck chassis, including minivans and sport-utility vehicles (SUVs) built on a truck chassis) that are subject to the luxury-auto limits (they are rated at 6,000 pounds gross (loaded) vehicle weight or less). (Code Sec. 280F(d)(5)(A)) One set of limits applies to light trucks and vans for which the bonus depreciation rules don’t apply under Code Sec. 168(k); the other set of limits applies to light trucks and vans for which the bonus depreciation rules do apply. Certain non-personal-use vehicles are exempt from the luxury auto limits regardless of their weight.
The following are the annual depreciation dollar caps for vehicles that are subject to the luxury-auto limits of Code Sec. 280F and are placed in service by the taxpayer in calendar year 2017.
If the bonus first year depreciation rules don’t apply to an auto (not a truck or van):
…$3,160 for the placed in service year;
…$5,100 for the second tax year;
…$3,050 for the third tax year; and
…$1,875 for each succeeding year.
If the bonus depreciation rules do apply to an auto (not a truck or van):
…$11,160 for the placed in service year;
…$5,100 for the second tax year;
…$3,050 for the third tax year; and
…$1,875 for each succeeding year.
RIA observation: For autos first placed in service in 2017, the dollar figures for all tax years are the same as those that applied for autos placed in service in 2016.
If the bonus depreciation rules don’t apply to a light truck or van (passenger auto built on a truck chassis, including minivan and sport-utility vehicle (SUV) built on a truck chassis):
…$3,560 for the placed in service year;
…$5,700 for the second tax year;
…$3,450 for the third tax year; and
…$2,075 for each succeeding year.
If the bonus depreciation rules do apply to a light truck or van:
…$11,560 for the placed in service year;
…$5,700 for the second tax year;
…$3,450 for the third tax year; and
…$2,075 for each succeeding year.
RIA observation: For a light truck or van placed in service in 2017, the dollar figures are the same as for such vehicles first placed in service in 2016, except that the third year amount is $100 higher.
RIA caution: The dollar limits must be reduced proportionately if business/investment use of a vehicle is less than 100%.
RIA observation: Heavy SUVs—those that are built on a truck chassis and are rated at more than 6,000 pounds gross (loaded) vehicle weight—are exempt from the luxury-auto dollar caps because they fall outside of the Code Sec. 280F(d)(5) definition of a passenger auto.
Lease income inclusion tables. A taxpayer that leases a business auto may deduct the part of the lease payment representing business/investment use. If business/investment use is 100%, the full lease cost is deductible. So that lessees can’t avoid the effect of the luxury auto limits, however, they must include a certain amount in income during each year of the lease to partially offset the lease deduction, if the vehicle’s fair market value exceeds certain dollar limits. (Code Sec. 280F(c)) The income inclusion amount varies with the initial fair market value of the leased auto and the year of the lease, and is adjusted for inflation each year.
Tables 5 and 6 of Rev Proc 2017-29 carry the income inclusion tables for passenger autos with a lease term beginning in 2017 and a fair market value over $19,000, and light trucks and vans with a lease term beginning in 2017 with a fair market value over $19,500.
References: For business auto depreciation limits, see FTC 2d/FIN ¶ L-10001; United States Tax Reporter ¶ 280F4. For income inclusion amounts for business auto lessees, see FTC 2d/FIN ¶ L-10200; United States Tax Reporter ¶ 280F4.
Rev Proc 2017-29, 2017-14 IRB
