IRS PROVIDES LIMITS ON DEPRECIATION DEDUCTIONS FOR AUTOS.
Rev. Proc. 98-30; 1998-1 C.B. 930
- Institutional AuthorsInternal Revenue Service
- Cross-Reference
Rev. Proc. 98-24, 1998-10 IRB 31;
- Code Sections
- Subject Area/Tax Topics
- Index Termsdepreciationluxury autos, depreciation, limit
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 98-11650 (12 original pages)
- Tax Analysts Electronic Citation98 TNT 67-5
Rev. Proc. 98-30
SECTION 1. PURPOSE
This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service during calendar year 1998, including separate limitations on passenger automobiles designed to be propelled primarily by electricity and built by an original equipment manufacturer (electric automobiles); (2) the amounts to be included in income by lessees of passenger automobiles first leased during calendar year 1998, including separate inclusion amounts for electric automobiles; and (3) the maximum allowable value of employer-provided automobiles first made available to employees for personal use in calendar year 1998 for which the vehicle cents-per-mile valuation rule provided under section 1.61-21(e) of the Income Tax Regulations may be applicable. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by section 280F(d)(7) of the Internal Revenue Code. The maximum allowable automobile value for applying the vehicle cents-per-mile valuation rule reflects the automobile price inflation adjustment of section 280F(d)(7) as required by section 1.61-21(e)(1)(iii)(A).
SECTION 2. BACKGROUND
For owners of automobiles, section 280F(a) imposes dollar limitations on the depreciation deduction for the year that the automobile is placed in service and each succeeding year. In the case of electric automobiles placed in service after August 5, 1997, and before January 1, 2005, section 280F(a)(1)(C) requires tripling of these limitation amounts. Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after calendar year 1988.
For leased automobiles, section 280F(c) requires a reduction in the deduction allowed to the lessee of the automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of automobiles. Under section 1.280F-7(a), this reduction requires the lessees to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. There is a table for lessees of electric automobiles and a table for all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each tax year after the automobile is first leased.
For automobiles first provided by employers to employees that meet the requirements of section 1.61-21(e)(1), the value to the employee of the use of the automobile may be determined under the vehicle cents-per-mile valuation rule of section 1.61-21(e). Section 1.61-21(e)(1)(iii)(A) provides that for an automobile first made available after 1988 to any employee of the employer for personal use, the value of the use of the automobile may not be determined under the vehicle cents-per-mile valuation rule for a calendar year if the fair market value of the automobile (determined pursuant to section 1.61-21(d)(5)(i) through (iv)) on the first date the automobile is made available to the employee exceeds $12,800 as adjusted by section 280F(d)(7).
SECTION 3. SCOPE AND OBJECTIVE
01. The limitations on depreciation deductions in section 4.02 of this revenue procedure apply to automobiles (other than leased automobiles) that are placed in service in calendar year 1998 and continue to apply for each tax year that the automobile remains in service.
02. The tables in section 4.03 of this revenue procedure apply to leased automobiles for which the lease term begins in calendar year 1998. Lessees of such automobiles must use these tables to determine the inclusion amount for each tax year during which the automobile is leased.
03. See Rev. Proc. 96-25, 1996-1 C.B. 681, for information on determining inclusion amounts for automobiles first leased before January 1, 1997; Rev. Proc. 97-20, 1997-11 I.R.B. 10, for automobiles first leased during calendar year 1997, including electric automobiles first leased on or after January 1, 1997, and before August 6, 1997; and Rev. Proc. 98-24, 1998-10 I.R.B. 31, for electric automobiles first leased after August 5, 1997, and before January 1, 1998.
04. The maximum fair market value figure in section 4.04(2) of this revenue procedure applies to employer-provided automobiles first made available to any employee for personal use in calendar year 1998. See Rev. Proc. 97-20, for the maximum fair market value figure for automobiles first made available in calendar year 1997.
SECTION 4. APPLICATION
01. A taxpayer placing an automobile in service for the first time during calendar year 1998 is limited to the depreciation deduction shown in Table 1 of section 4.02(2) or, in the case of an electric automobile, Table 2. A taxpayer first leasing an automobile in calendar year 1998 must determine the inclusion amount that is added to gross income using Table 3 of section 4.03 or, in the case of an electric automobile, Table 4. Otherwise, the procedures of section 1.280F-7(a) must be followed. An employer providing an automobile for the first time in calendar year 1998 for the personal use of any employee may determine the value of the use of the automobile by using the cents-per-mile valuation rule in section 1.61- 21(e) if the fair market value of the automobile does not exceed the amount specified in section 4.04(2). If the fair market value of the automobile exceeds the amount specified in section 4.04(2), the employer may determine the value of the use of the automobile under the general valuation rules of section 1.61-21(b) or under the special valuation rules of section 1.61-21(d) (Automobile lease valuation) or section 1.61-21(f) (Commuting valuation) if the applicable requirements are met.
02. Limitations on Depreciation Deductions for Certain Automobiles.
(1) Amount of the Inflation Adjustment. Under section 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. The term "CPI automobile component" is defined in section 280F(d)(7)(B)(ii) as the "automobile component" of the Consumer Price Index for all Urban Consumers published by the Department of Labor (the CPI). The new car component of the CPI was 115.2 for October 1987 and 140.6 for October 1997. The October 1997 index exceeded the October 1987 index by 25.4. The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 1998 is 22.05 percent (25.4/115.2 x 100%). This adjustment is applicable to all automobiles that are first placed in service in calendar year 1998. The dollar limitations in section 280F(a) must therefore be multiplied by a factor of 0.2205, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than electric automobiles) for 1998. To determine the dollar limitations applicable to an electric automobile first placed in service during calendar year 1998, the dollar limitations in section 280F(a) are tripled in accordance with section 280F(a)(1)(C) and are then multiplied by a factor of 0.2205; the resulting increases, after rounding to the nearest $100, are added to the tripled 1988 limitations to give the depreciation limitations for 1998.
(2) Amount of the Limitation. For automobiles (other than electric automobiles) placed in service in calendar year 1998, Table 1 contains the dollar amount of the depreciation limitations for each tax year. For electric automobiles placed in service in calendar year 1998, Table 2 contains these amounts.
DEPRECIATION LIMITATIONS FOR AUTOMOBILES
(OTHER THAN ELECTRIC AUTOMOBILES)
FIRST PLACED IN SERVICE IN CALENDAR YEAR 1998
Tax Year Amount
________ ______
1st Tax Year $3,160
2nd Tax Year $5,000
3rd Tax Year $2,950
Each Succeeding Year $1,775
TABLE 2
DEPRECIATION LIMITATIONS FOR ELECTRIC AUTOMOBILES
FIRST PLACED IN SERVICE IN CALENDAR YEAR 1998
Tax Year Amount
________ ______
1st Tax Year $9,380
2nd Tax Year $15,000
3rd Tax Year $8,950
Each Succeeding Year $5,425
03. Inclusions in Income of Lessees of Automobiles.
The inclusion amounts for automobiles first leased in calendar year 1998 are calculated under the procedures described in section 1.280F-7(a). Lessees of automobiles other than electric automobiles should use Table 3 in applying these procedures, while lessees of electric automobiles should use Table 4.
DOLLAR AMOUNTS FOR AUTOMOBILES (OTHER THAN ELECTRIC AUTOMOBILES)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 1998
Fair Market Value Tax Year During Lease
of Automobile
_________________ _________________________________________
1st 2nd 3rd 4th 5th and
Over Not Over Later
$15,800 16,100 1 5 8 12 14
16,100 16,400 4 10 16 22 25
16,400 16,700 6 15 25 31 36
16,700 17,000 9 20 33 41 47
17,000 17,500 12 28 43 53 62
17,500 18,000 16 37 56 70 80
18,000 18,500 20 46 70 85 99
18,500 19,000 24 55 83 101 117
19,000 19,500 28 64 96 117 136
19,500 20,000 32 73 110 133 154
20,000 20,500 36 82 123 149 173
20,500 21,000 40 91 136 165 191
21,000 21,500 45 99 150 181 209
21,500 22,000 49 108 163 197 228
22,000 23,000 55 122 183 221 255
23,000 24,000 63 140 210 252 292
24,000 25,000 71 158 236 285 329
25,000 26,000 79 176 263 316 366
26,000 27,000 88 193 290 348 403
27,000 28,000 96 211 317 380 439
28,000 29,000 104 229 343 412 477
29,000 30,000 112 247 370 444 513
30,000 31,000 120 265 396 476 550
31,000 32,000 128 283 423 508 587
32,000 33,000 137 301 449 540 624
33,000 34,000 145 319 476 571 661
34,000 35,000 153 337 502 604 697
35,000 36,000 161 355 529 635 735
36,000 37,000 169 373 556 667 771
37,000 38,000 178 391 582 699 808
38,000 39,000 186 409 608 731 845
39,000 40,000 194 427 635 763 882
40,000 41,000 202 445 662 794 919
41,000 42,000 210 463 688 827 955
42,000 43,000 218 481 715 859 992
43,000 44,000 227 498 742 891 1,028
44,000 45,000 235 516 769 922 1,066
45,000 46,000 243 534 795 955 1,102
46,000 47,000 251 552 822 986 1,140
47,000 48,000 259 570 849 1,018 1,176
48,000 49,000 268 588 875 1,050 1,213
49,000 50,000 276 606 901 1,082 1,250
50,000 51,000 284 624 928 1,114 1,286
51,000 52,000 292 642 955 1,145 1,324
52,000 53,000 300 660 981 1,178 1,360
53,000 54,000 308 678 1,008 1,209 1,398
54,000 55,000 317 695 1,035 1,241 1,434
55,000 56,000 325 713 1,062 1,273 1,471
56,000 57,000 333 732 1,087 1,305 1,508
57,000 58,000 341 750 1,114 1,337 1,544
58,000 59,000 349 768 1,140 1,369 1,582
59,000 60,000 358 785 1,168 1,400 1,619
60,000 62,000 370 812 1,207 1,449 1,674
62,000 64,000 386 848 1,261 1,512 1,747
64,000 66,000 403 884 1,313 1,577 1,821
66,000 68,000 419 920 1,367 1,640 1,894
68,000 70,000 435 956 1,420 1,704 1,968
70,000 72,000 452 991 1,474 1,767 2,042
72,000 74,000 468 1,027 1,527 1,832 2,115
74,000 76,000 484 1,063 1,580 1,896 2,189
76,000 78,000 501 1,099 1,633 1,959 2,263
78,000 80,000 517 1,135 1,686 2,023 2,337
80,000 85,000 546 1,198 1,779 2,134 2,466
85,000 90,000 587 1,287 1,913 2,294 2,649
90,000 95,000 627 1,377 2,046 2,453 2,834
95,000 100,000 668 1,467 2,178 2,613 3,018
100,000 110,000 730 1,601 2,378 2,852 3,294
110,000 120,000 812 1,780 2,644 3,172 3,662
120,000 130,000 893 1,960 2,910 3,490 4,031
130,000 140,000 975 2,139 3,176 3,810 4,398
140,000 150,000 1,057 2,318 3,443 4,128 4,767
150,000 160,000 1,139 2,498 3,708 4,447 5,135
160,000 170,000 1,221 2,677 3,974 4,766 5,504
170,000 180,000 1,302 2,857 4,240 5,085 5,872
180,000 190,000 1,384 3,036 4,506 5,404 6,241
190,000 200,000 1,466 3,215 4,772 5,724 6,608
200,000 210,000 1,548 3,394 5,039 6,042 6,977
210,000 220,000 1,630 3,574 5,304 6,361 7,345
220,000 230,000 1,712 3,753 5,570 6,680 7,714
230,000 240,000 1,793 3,932 5,837 6,999 8,082
240,000 250,000 1,875 4,112 6,102 7,318 8,450
TABLE 4
DOLLAR AMOUNTS FOR ELECTRIC AUTOMOBILES
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 1998
Fair Market Value Tax Year During Lease
of Automobile
_________________ _________________________________________
1st 2nd 3rd 4th 5th and
Over Not Over Later
$47,000 48,000 5 11 18 21 23
48,000 49,000 13 29 45 52 60
49,000 50,000 21 47 71 85 96
50,000 51,000 29 65 98 116 134
51,000 52,000 38 83 124 148 171
52,000 53,000 46 101 151 180 207
53,000 54,000 54 119 177 212 244
54,000 55,000 62 137 204 244 281
55,000 56,000 70 155 231 275 318
56,000 57,000 79 172 258 307 355
57,000 58,000 87 190 284 340 391
58,000 59,000 95 208 311 372 428
59,000 60,000 103 226 338 403 465
60,000 62,000 115 253 378 451 520
62,000 64,000 132 289 430 515 594
64,000 66,000 148 325 484 578 668
66,000 68,000 164 361 537 643 741
68,000 70,000 181 396 591 706 815
70,000 72,000 197 432 644 770 888
72,000 74,000 214 468 697 834 962
74,000 76,000 230 504 750 898 1,035
76,000 78,000 246 540 803 962 1,109
78,000 80,000 263 576 856 1,025 1,183
80,000 85,000 291 639 949 1,137 1,312
85,000 90,000 332 728 1,083 1,296 1,496
90,000 95,000 373 818 1,215 1,456 1,681
95,000 100,000 414 908 1,348 1,615 1,865
100,000 110,000 475 1,042 1,548 1,855 2,141
110,000 120,000 557 1,221 1,814 2,174 2,509
120,000 130,000 639 1,401 2,080 2,492 2,878
130,000 140,000 721 1,580 2,346 2,812 3,245
140,000 150,000 803 1,759 2,612 3,131 3,614
150,000 160,000 884 1,939 2,878 3,450 3,982
160,000 170,000 966 2,118 3,144 3,769 4,350
170,000 180,000 1,048 2,297 3,410 4,088 4,719
180,000 190,000 1,130 2,477 3,676 4,406 5,087
190,000 200,000 1,212 2,656 3,942 4,726 5,455
200,000 210,000 1,293 2,835 4,209 5,044 5,824
210,000 220,000 1,375 3,015 4,474 5,364 6,191
220,000 230,000 1,457 3,194 4,740 5,683 6,560
230,000 240,000 1,539 3,373 5,006 6,002 6,928
240,000 250,000 1,621 3,552 5,273 6,320 7,297
04. Maximum Automobile Value for Using the Cents-per-mile Valuation Rule.
(1) Amount of Adjustment. Under section 1.61-21(e)(1)(iii)(A), the limitation on the fair market value of an employer-provided automobile first made available to any employee for personal use after 1988 is to be adjusted in accordance with section 280F(d)(7). Accordingly, the adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987 (See, section 4.02(1).) The new car component of the CPI was 115.2 for October 1987 and 140.6 for October 1997. The October 1997 index exceeded the October 1987 index by 25.4. The Internal Revenue Service has, therefore, determined that the adjustment for 1998 is 22.05 percent (25.4/115.2 x 100%). This adjustment is applicable to all employer-provided automobiles first made available to any employee for personal use in calendar year 1998. The maximum fair market value specified in section 1.61- 21(e)(1)(iii)(A) must therefore be multiplied by a factor of 0.2205, and the resulting increase, after rounding to the nearest $100, is added to $12,800 to give the maximum value for 1998.
(2) The Maximum Automobile Value. For automobiles first made available in calendar year 1998 to any employee of the employer for personal use, the vehicle cents-per-mile valuation rule may be applicable if the fair market value of the automobile on the date it is first made available does not exceed $15,600.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective for automobiles (other than leased automobiles) that are first placed in service during calendar year 1998, to leased automobiles that are first leased during calendar year 1998, and to employer-provided automobiles first made available to employees for personal use in calendar year 1998.
DRAFTING INFORMATION
The principal author of this revenue procedure is Bernard P. Harvey of the Office of the Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding the depreciation limitations and lessee inclusion amounts in this revenue procedure, contact Mr. Harvey at (202) 622-3110; for further information regarding the maximum automobile value for applying the vehicle cents-per-mile valuation rule, contact Ms. Janine Cook of the Office of the Associate Chief Counsel (Employee Benefits and Exempt Organizations) at (202) 622-6040 (not toll-free calls).
- Institutional AuthorsInternal Revenue Service
- Cross-Reference
Rev. Proc. 98-24, 1998-10 IRB 31;
- Code Sections
- Subject Area/Tax Topics
- Index Termsdepreciationluxury autos, depreciation, limit
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 98-11650 (12 original pages)
- Tax Analysts Electronic Citation98 TNT 67-5