TAX ALERT |
The IRS recently released Revenue Procedure 2021-31, providing rules for depreciating passenger automobiles.
Rev. Proc. 2021-31 provides two major updates: (1) limitations on depreciation deductions for owners of passenger automobiles placed in service in calendar year 2021, and (2) amounts that lessees must include in income for passenger automobiles first leased in 2021.
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 2021, which vary depending on whether bonus depreciation applies. Table 3 describes the inclusions in gross income required by Reg. section 1.280F-7(a) (applicable only to leases).
All taxpayers placing passenger automobiles in service in 2021 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 2021 for which bonus depreciation applies
|
Tax Year |
Amount |
|
1st Tax Year |
$18,200 |
|
2nd Tax Year |
$16,400 |
|
3rd Tax Year |
$9,800 |
|
Each Succeeding Year |
$5,860 |
Table 2: depreciation limits for passenger automobiles placed in service during calendar year 2021 for which bonus depreciation does not apply
|
Tax Year |
Amount |
|
1st Tax Year |
$10,200 |
|
2nd Tax Year |
$16,400 |
|
3rd Tax Year |
$9,800 |
|
Each Succeeding Year |
$5,860 |
Table 3: income inclusions for passenger automobiles with a lease term beginning in calendar year 2021
|
Fair Market Value of Passenger Automobile |
Tax Year During Lease |
|||||
|
Over |
Not Over |
1st |
2nd |
3rd |
4th |
5th & later |
|
$51,000 |
$52,000 |
0 |
0 |
1 |
0 |
1 |
|
52,000 |
53,000 |
1 |
1 |
1 |
2 |
2 |
|
53,000 |
54,000 |
1 |
2 |
2 |
3 |
2 |
|
54,000 |
55,000 |
1 |
3 |
3 |
5 |
5 |
|
55,000 |
56,000 |
2 |
3 |
5 |
6 |
6 |
|
56,000 |
57,000 |
2 |
4 |
6 |
7 |
8 |
|
57,000 |
58,000 |
2 |
5 |
7 |
8 |
10 |
|
58,000 |
59,000 |
3 |
5 |
8 |
10 |
11 |
|
59,000 |
60,000 |
3 |
6 |
9 |
11 |
13 |
|
60,000 |
62,000 |
3 |
7 |
11 |
13 |
15 |
|
62,000 |
64,000 |
4 |
9 |
13 |
15 |
18 |
|
64,000 |
66,000 |
5 |
10 |
15 |
18 |
21 |
|
66,000 |
68,000 |
5 |
12 |
17 |
21 |
24 |
|
68,000 |
70,000 |
6 |
13 |
20 |
23 |
27 |
|
70,000 |
72,000 |
7 |
14 |
22 |
26 |
30 |
|
72,000 |
74,000 |
7 |
16 |
24 |
29 |
33 |
|
74,000 |
76,000 |
8 |
18 |
26 |
31 |
36 |
|
76,000 |
78,000 |
9 |
19 |
28 |
34 |
39 |
|
78,000 |
80,000 |
9 |
21 |
30 |
37 |
42 |
|
80,000 |
85,000 |
11 |
23 |
34 |
41 |
48 |
|
85,000 |
90,000 |
12 |
27 |
40 |
47 |
55 |
|
90,000 |
95,000 |
14 |
30 |
45 |
55 |
62 |
|
95,000 |
100,000 |
16 |
34 |
50 |
61 |
70 |
|
100,000 |
110,000 |
18 |
40 |
58 |
71 |
81 |
|
110,000 |
120,000 |
21 |
47 |
70 |
83 |
97 |
|
120,000 |
130,000 |
25 |
54 |
81 |
96 |
112 |
|
130,000 |
140,000 |
28 |
62 |
91 |
110 |
127 |
|
140,000 |
150,000 |
31 |
69 |
103 |
123 |
141 |
|
150,000 |
160,000 |
35 |
76 |
114 |
136 |
157 |
|
160,000 |
170,000 |
38 |
84 |
124 |
149 |
172 |
|
170,000 |
180,000 |
41 |
91 |
135 |
163 |
187 |
|
180,000 |
190,000 |
45 |
98 |
146 |
176 |
202 |
|
190,000 |
200,000 |
48 |
106 |
157 |
188 |
218 |
|
200,000 |
210,000 |
51 |
113 |
168 |
202 |
232 |
|
210,000 |
220,000 |
55 |
120 |
179 |
215 |
247 |
|
220,000 |
230,000 |
58 |
128 |
190 |
227 |
263 |
|
230,000 |
240,000 |
61 |
135 |
201 |
241 |
278 |
|
240,000 |
and over |
65 |
142 |
212 |
254 |
293 |
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This article was written by Tracy Watkins, John Charin and originally appeared on 2021-08-10.
2021 RSM US LLP. All rights reserved.
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