Rev. Proc. 2014-21 - Luxury automobile depreciation limitations for 2014 

February 25:  The IRS today released an advance copy of Rev. Proc. 2014-21—an annual revenue procedure providing:
  • The annual depreciation limitations for passenger automobiles first placed in service in calendar year 2014
  • The annual depreciation limits for trucks and vans first placed in service in 2014
  • The lease inclusion amounts for automobiles first leased in 2014 (as well as amounts for trucks and vans first leased in 2014

These amounts are provided in table format in Rev. Proc. 2014-21 [PDF 25 KB] and are also provided below.

Background

Section 280F(a) sets a specific annual dollar limitation (adjusted each year for inflation) on the amount of depreciation allowed for any "passenger automobile"—generally referred to as the "luxury automobile" limitations. The limitations apply to four-wheeled vehicles that are manufactured primarily for use on public streets, roads, and highways, and that are rated at 6,000 pounds gross vehicle weight (GVW) or less (except for trucks and vans, a vehicle's "unloaded" GVW rating is used).


Any depreciation disallowed because of these annual limitations is allowed in years past the end of the usual depreciation schedule, though still subject to the annual limitations.


There are higher annual "luxury automobile" depreciation limitations for vans and trucks than for other passenger automobiles. For this purpose, “vans and trucks” are passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles that are built on a truck chassis.


Note that there is a complete exclusion from the annual depreciation limitations for “qualified nonpersonal use vehicles”—these are described in regulations as vans and light trucks whose design makes them “not likely to be used more than a de minimis amount for personal purposes.”


There have been higher first-year depreciation limits for vehicles that are allowed a 50% “bonus” depreciation deduction in the year placed in service. However, at present, bonus depreciation is not allowed for property acquired and placed in service after December 31, 2013. Therefore, Rev. Proc. 2014-21 does not contain any tables specifying first-year bonus depreciation amounts.

Rev. Proc. 2014-21

The general inflation-adjusted limitations for passenger automobiles (other than trucks and vans) placed in service during 2014 are the same applied as during 2013:


Passenger automobiles: Year placed in service
1st tax year $3,160
2nd tax year $5,100
3rd tax year $3,050
Each succeeding tax year $1,875

For an automobile being depreciated under the modified accelerated cost recovery system (MACRS)—subject to a five-year recovery period and a half-year convention—the $3,160 cap serves to limit the first-year depreciation otherwise allowed for an automobile with a basis of more than $15,800.

Trucks and vans

For trucks and vans placed in service during 2014, the general inflation-adjusted limitations are as follows:


Trucks and vans: Year placed in service
1st tax year $3,460
2nd tax year $5,500
3rd tax year $3,350
Each succeeding tax year $1,975

These limits are slightly higher than the limits that applied to trucks and vans placed in service during 2013 (and were not allowed a bonus depreciation deduction).




©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this

Subscribe

Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.


Email your contact information.

TaxNewsFlash-United States by year