2012 Depreciation Limits for Business Vehicles

The IRS has announced the dollar limits on depreciation that can be claimed for cars and light trucks purchased for business and placed in service in 2012. The limits are slightly higher than those in 2011.

For passenger cars purchased and placed in service in 2011, the first-year dollar limit on depreciation is $11,160 for vehicles eligible for bonus depreciation (e.g., new cars) and $3,160 for vehicles not eligible for bonus depreciation (e.g., preowned cars). The dollar limits for second, third, and following years are also higher for 2012 purchases than they were for cars first placed in service in 2011.

Inclusion amounts for leased vehicles

The IRS also announced the inclusion amounts for vehicles first leased in 2012 that are used for business. The inclusion amount is designed to equal the write-off allowed for leased vehicles with the depreciation allowance for purchased vehicles. The inclusion amount is added to income each year of the lease. The inclusion amount applies to passenger cars and trucks with a fair market value over $18,500. The inclusion amounts for passenger cars first leased in 2012 are lower than the inclusion amounts for 2011. For example, the first-year inclusion amount for a leased car with a fair market value of $35,000 is only $11 in 2012; a similar vehicle first leased in 2011 had an inclusion amount of $19.

Source: Rev. Proc. 2012-23