IRS issues 2008 depreciation limits for business vehicles

The IRS has issued the depreciation limits for business automobiles, trucks and vans first placed in service in 2008. This year, the IRS also took into account bonus depreciation in the Economic Stimulus Act of 2008. At the same time, the IRS released the annual income inclusion amounts for vehicles first leased in 2008.

Bonus depreciation

When Congress passed the Economic Stimulus Act of 2008 earlier this year, it gave taxpayers additional 50 percent first-year bonus depreciation for qualifying property placed in service in 2008. Congress also authorized an $8,000 increase in first-year depreciation for "luxury" automobiles. The new IRS dollar-amount tables account for all variations.

Passenger automobiles

The maximum depreciation amounts for passenger automobiles first placed in service during the 2008 calendar year are:

• $2,960 for the first year ($10,960 for vehicles qualifying for 50-percent first-year bonus depreciation);

• $4,800 for the second year;

• $2,850 for the third year; and

• $1,775 for each tax year thereafter.

Trucks and vans

The maximum depreciation amounts for trucks and vans first placed in service during the 2008 calendar year are:

• $3,160 for the first tax year ($11,160 for vehicles qualifying for 50-percent first-year bonus depreciation);

• $5,100 for the second tax year;

• $3,050 for the third tax year; and

• $1,875 for each tax year thereafter.

To qualify for the truck and van depreciation deduction, a vehicle must be a passenger vehicle built on a truck chassis with an unloaded gross weight of more than 6,000 pounds. A vehicle built on an automobile chassis is classified as an automobile regardless of weight even if its manufacturer calls it a sport-utility vehicle (SUV).

Leases

Lease payments for vehicles used for business or investment purposes are deductible in proportion to the vehicle's business use. However, lessees must include a certain amount in income during the years the vehicle is leased to partially offset the amounts by which lease payments exceed the luxury auto limits. The IRS identifies the income inclusion amounts for passenger automobiles, trucks and vans with lease terms beginning in 2008 in Revenue Procedure 2008-22.

Please call or email or office if you have any questions about the 2008 depreciation amounts.

(Rev. Proc. 2008-22)