Tax Tip Tuesday: 2016 Inflation-Adjusted Depreciation Limits for Business Vehicles

April 5, 2016

 

The IRS has finally released the inflation-adjusted depreciation limits for business autos, light trucks and vans placed in service by the taxpayer in 2016.  


There are four sets of dollar limits. Two are for passenger autos (that are not trucks or vans and are subject to the luxury-auto limits and are rated at 6,000 pounds unloaded gross vehicle weight or less). One of these applies to autos for which the bonus depreciation rules don't apply. The other set of limits applies to autos for which the bonus depreciation rules do apply.


There also are two sets of limits for light trucks or vans (passenger autos built on a truck chassis, including minivans and sport-utility vehicles (SUVs) built on a truck chassis, which are subject to the luxury-auto limits and they are rated at 6,000 pounds gross (loaded) vehicle weight or less). One set of limits applies to light trucks and vans for which the bonus depreciation rules don't apply. The other applies to light trucks and vans for which the bonus depreciation rules do apply.


The following are the annual depreciation dollar caps for vehicles that are subject to the luxury-auto limits and placed in service by the taxpayer in calendar year 2016.


If the bonus first year depreciation rules don't apply to an auto (not a truck or van):

  • $3,160 for the placed in service year

  • $5,100 for the second tax year

  • $3,050 for the third tax year

  • $1,875 for each succeeding year

 

If the bonus depreciation rules do apply to an auto (not a truck or van):

  • $11,160 for the placed in service year

  • $5,100 for the second tax year

  • $3,050 for the third tax year

  • $1,875 for each succeeding year

 

If the bonus depreciation rules don't apply to a light truck or van (passenger auto built on a truck chassis, including minivan and sport-utility vehicle (SUV) built on a truck chassis):

  • $3,560 for the placed in service year

  • $5,700 for the second tax year

  • $3,350 for the third tax year

  • $2,075 for each succeeding year

 

If the bonus depreciation rules do apply to a light truck or van:

  • $11,560 for the placed in service year

  • $5,700 for the second tax year

  • $3,350 for the third tax year

  • $2,075 for each succeeding year

 

The dollar limits must be reduced proportionately if business/investment use of a vehicle is less than 100%.


Heavy SUVs—those that are built on a truck chassis and are rated at more than 6,000 pounds gross (loaded) vehicle weight—are exempt from the luxury-auto dollar caps definition of a passenger auto.

 

Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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