Tax Blog

2019 Inflation-Adjusted Vehicle Depreciation Limits and Income Inclusions

In May, 2019, the IRS issued inflation-adjusted vehicle depreciation limits for passenger automobiles placed into service after December 31, 2018, as well as the amounts of income inclusion for lease holders, or lessees, of passenger automobiles first leased after December 31, 2018 (Rev. Proc. 2019-26). The IRS has included trucks and vans under the term “passenger automobiles” for purposes of this revenue procedure. The inflation adjustment, as required by 280F(d)(7), applies the automobile component of the chained consumer price index for all urban consumers (“C-CPI-U”). The C-CPI-U has replaced the prior consumer price index when the new tax law, the Tax Cuts and Jobs Act, went into effect (Tax Cuts and Jobs Act, P.L. 115-97).

Additional (bonus) first-year depreciation deductions applying Under Sec. 168(k) to passenger automobiles acquired prior to September 28, 2017 and placed into service after December 31, 2018 are subject to a depreciation limit under Sec. 280F(d)(7) in the amount of: $14,900 for the first tax year; $16,100 for the second tax year; $9,700 for the third tax year; and $5,760 for each succeeding year.

Additional (bonus) first-year depreciation deductions applying Under Sec. 168(k) to passenger automobiles acquired subsequent to September 27, 2017 and placed into service after December 31, 2018 are subject to a depreciation limit under Sec. 280F(d)(7) in the amount of: $14,900 for the first tax year; $16,100 for the second tax year; $9,700 for the third tax year; and $5,760 for each succeeding year.

For passenger vehicles that are not subject to Sec. 168(k), additional (bonus) first-year depreciation deduction, the depreciation limits pursuant to Sec. 280F(d)(7) are: $10,100 for the first tax year; $16,100 for the second tax year; $9,700 for the third tax year; and $5,760 for each succeeding year.

To determine the income inclusion amounts for passenger automobiles first leased after December 31, 2018, follow the procedures in Regs. Sec. 1.280F-7. When applying the prescribed procedures, lessees should refer to Table 4 of Rev. Proc. 2019-26, which contains the income inclusion amounts for such leases. The inclusion amounts are shown based on a range of fair market values for each tax year after the automobile was first leased.

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