United States

IRS releases 2020 limits for depreciation deductions for autos

TAX ALERT  | 

On July 9, 2020, the IRS released Revenue Procedure 2020-37, providing rules for depreciating passenger automobiles.

Rev. Proc. 2020-37 provides two major updates: (1) limitations on depreciation deductions for owners of passenger automobiles placed in service in calendar year 2020, and (2) amounts that must be included in income by lessees of passenger automobiles first leased in calendar year 2020.

Section 280F(a) limits depreciation deductions for the year taxpayers place passenger automobiles in service, as well as succeeding years. Section 280F(d)(7) requires the IRS to adjust the depreciation limits to reflect inflation with reference to the Department of Labor’s Chained Consumer Price Index for all Urban Consumers.

Accordingly, the new revenue procedure contains three tables. Tables 1 and 2 list the permitted yearly depreciation deductions updated for 2020, which vary depending on whether bonus depreciation applies. Table 3 describes the inclusions in gross income required by Reg. section 1.280F-7(a).

All taxpayers placing passenger automobiles in service in 2020 must use the limits in the tables below. Please see our Tax Alert on the Rev. Proc. 2019-13 safe harbor method for bonus depreciation on passenger automobiles for more detail on classifying property and using the depreciation limits.

Table 1: depreciation limits for passenger automobiles acquired after Sept. 27, 2017 and placed in service during calendar year 2020 for which bonus depreciation applies

Tax Year

Amount

1st Tax Year

$18,100

2nd Tax Year

$16,100

3rd Tax Year

$9,700

Each Succeeding Year

$5,760


Table 2: depreciation limits for passenger automobiles placed in service during calendar year 2020 for which bonus depreciation does not apply

Tax Year

Amount

1st Tax Year

$10,100

2nd Tax Year

$16,100

3rd Tax Year

$9,700

Each Succeeding Year

$5,760


Table 3: income inclusions for passenger automobiles with a lease term beginning in calendar year 2020

Fair Market Value of Passenger Automobile

Tax Year During Lease

Over

Not Over

1st

2nd

3rd

4th

5th & later

$50,000

$51,000

0

1

0

2

2

51,000

52,000

2

6

9

10

13

52,000

53,000

5

11

17

20

24

53,000

54,000

7

17

24

30

35

54,000

55,000

10

22

32

39

46

55,000

56,000

12

27

41

48

57

56,000

57,000

15

32

49

58

68

57,000

58,000

17

38

56

68

79

58,000

59,000

19

44

64

77

90

59,000

60,000

22

49

72

87

100

60,000

62,000

26

56

84

102

117

62,000

64,000

30

68

99

121

139

64,000

66,000

35

78

116

139

161

66,000

68,000

40

89

131

159

183

68,000

70,000

45

99

148

177

205

70,000

72,000

50

110

163

197

227

72,000

74,000

55

121

179

215

249

74,000

76,000

60

131

195

235

271

76,000

78,000

64

142

211

254

293

78,000

80,000

69

153

227

272

315

80,000

85,000

78

172

254

306

353

85,000

90,000

90

198

295

353

408

90,000

95,000

102

225

334

401

463

95,000

100,000

114

252

373

449

518

100,000

110,000

133

292

433

520

600

110,000

120,000

157

345

513

615

710

120,000

130,000

181

399

592

710

820

130,000

140,000

206

452

671

805

931

140,000

150,000

230

506

750

901

1,040

150,000

160,000

254

559

830

996

1,150

160,000

170,000

279

612

909

1,091

1,260

170,000

180,000

303

666

988

1,186

1,370

180,000

190,000

327

720

1,067

1,281

1,480

190,000

200,000

351

773

1,147

1,377

1,589

200,000

210,000

376

826

1,227

1,471

1,700

210,000

220,000

400

880

1,306

1,566

1,810

220,000

230,000

424

934

1,385

1,661

1,920

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