The IRS has just released the new depreciation limitations and the annual lessee inclusion amounts for luxury vehicles placed in service or leased during 2015. In addition, there is a change for 2014 due to the extension of the provision for bonus depreciation. These new limits can be found in the IRS Revenue Procedure 2015-19.
First, let’s talk about the new limits for luxury vehicles placed in service in 2015:
There are two categories of vehicles to which these limits apply:
- Passenger automobiles that are rated at 6,000 pounds unloaded* gross vehicle weight or less, and
- Light trucks and vans that are rated at 6,000 pounds (loaded*) gross vehicle weight or less. Included in this second category are passenger vehicles built on a truck chassis, including minivans and sport-utility vehicles (SUVs) built on a truck chassis.
*Fascinating Fixed Assets Fact: The weight of a luxury car is not measured the same as a luxury truck. The 6,000 pound weight limit for an automobile is based on its unloaded gross vehicle weight, while the truck’s weight is based on its loaded gross vehicle weight (per IRS Code Section 280F).
Note that certain non-personal-use vehicles are exempt from the luxury auto limits regardless of their weight (such as ambulances and dump trucks). Also, heavy SUVs (meaning those built on a truck chassis and rated at more than 6,000 pounds <but not more than 14,000 pounds> unloaded gross vehicle weight) are exempt from the luxury-vehicle limits. (Although the latter are limited to a maximum $25,000 Section 179 expensing.)
The 2015 depreciation limits for the first category, passenger autos, have not changed and are the same as for those autos placed in service in 2014:
- Year 1, the placed-in-service year: $3,160
- Year 2: $5,100
- Year 3: $3,050
- Year 4 and each succeeding year: $1,875
For the second category, light trucks and vans, only the limit for the second year has been increased and is $100 more than in 2014:
- Year 1, the placed-in-service year , $3,460
- Year 2: $5,600 (increased by $100)
- Year 3: $3,350
- Year 4 and each succeeding year: $1,975
Furthermore, for vehicle lease terms beginning in 2015, annual income inclusion amounts apply to vehicles with a lower fair market value than last year.
As for the change in the amount of depreciation that may be claimed on luxury vehicles placed in service in 2015:
Because the Tax Increase Prevention Act of 2014 (aka, TIPA), which was passed in December 2014, extended bonus depreciation retroactively to the beginning of 2014, Revenue Procedure 2015-19 includes revised amounts for qualifying vehicles placed in service in 2014. Such vehicles are allowed an additional $8,000 of depreciation expense in the placed-in-service year. Remember, since bonus depreciation was only extended for one year, through 2014, the additional $8,000 of depreciation only applies to vehicles placed in service before 2015.