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1040eztaxform

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1040eztaxform

1040eztaxform 4. 1040eztaxform   Transportation Table of Contents Parking fees. 1040eztaxform Advertising display on car. 1040eztaxform Car pools. 1040eztaxform Hauling tools or instruments. 1040eztaxform Union members' trips from a union hall. 1040eztaxform Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. 1040eztaxform These expenses include the cost of transportation by air, rail, bus, taxi, etc. 1040eztaxform , and the cost of driving and maintaining your car. 1040eztaxform Transportation expenses include the ordinary and necessary costs of all of the following. 1040eztaxform Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. 1040eztaxform Tax home is defined in chapter 1. 1040eztaxform Visiting clients or customers. 1040eztaxform Going to a business meeting away from your regular workplace. 1040eztaxform Getting from your home to a temporary workplace when you have one or more regular places of work. 1040eztaxform These temporary workplaces can be either within the area of your tax home or outside that area. 1040eztaxform Transportation expenses do not include expenses you have while traveling away from home overnight. 1040eztaxform Those expenses are travel expenses discussed in chapter 1 . 1040eztaxform However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. 1040eztaxform See Car Expenses , later. 1040eztaxform Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. 1040eztaxform However, there may be exceptions to this general rule. 1040eztaxform You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. 1040eztaxform Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. 1040eztaxform Illustration of transportation expenses. 1040eztaxform    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. 1040eztaxform You may want to refer to it when deciding whether you can deduct your transportation expenses. 1040eztaxform Temporary work location. 1040eztaxform   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. 1040eztaxform   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. 1040eztaxform   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. 1040eztaxform   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. 1040eztaxform It will not be treated as temporary after the date you determine it will last more than 1 year. 1040eztaxform   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. 1040eztaxform You may have deductible travel expenses as discussed in chapter 1 . 1040eztaxform No regular place of work. 1040eztaxform   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. 1040eztaxform   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. 1040eztaxform   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. 1040eztaxform These are nondeductible commuting expenses. 1040eztaxform Two places of work. 1040eztaxform   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. 1040eztaxform However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. 1040eztaxform   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. 1040eztaxform You cannot deduct them. 1040eztaxform Armed Forces reservists. 1040eztaxform   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. 1040eztaxform You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . 1040eztaxform   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. 1040eztaxform In this case, your transportation generally is a nondeductible commuting expense. 1040eztaxform However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. 1040eztaxform   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. 1040eztaxform   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. 1040eztaxform These expenses are discussed in chapter 1 . 1040eztaxform   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. 1040eztaxform For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. 1040eztaxform Commuting expenses. 1040eztaxform   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. 1040eztaxform These costs are personal commuting expenses. 1040eztaxform You cannot deduct commuting expenses no matter how far your home is from your regular place of work. 1040eztaxform You cannot deduct commuting expenses even if you work during the commuting trip. 1040eztaxform Example. 1040eztaxform You sometimes use your cell phone to make business calls while commuting to and from work. 1040eztaxform Sometimes business associates ride with you to and from work, and you have a business discussion in the car. 1040eztaxform These activities do not change the trip from personal to business. 1040eztaxform You cannot deduct your commuting expenses. 1040eztaxform Parking fees. 1040eztaxform    Fees you pay to park your car at your place of business are nondeductible commuting expenses. 1040eztaxform You can, however, deduct business-related parking fees when visiting a customer or client. 1040eztaxform Advertising display on car. 1040eztaxform   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. 1040eztaxform If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. 1040eztaxform Car pools. 1040eztaxform   You cannot deduct the cost of using your car in a nonprofit car pool. 1040eztaxform Do not include payments you receive from the passengers in your income. 1040eztaxform These payments are considered reimbursements of your expenses. 1040eztaxform However, if you operate a car pool for a profit, you must include payments from passengers in your income. 1040eztaxform You can then deduct your car expenses (using the rules in this publication). 1040eztaxform Hauling tools or instruments. 1040eztaxform   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. 1040eztaxform However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). 1040eztaxform Union members' trips from a union hall. 1040eztaxform   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. 1040eztaxform Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. 1040eztaxform Office in the home. 1040eztaxform   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. 1040eztaxform (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. 1040eztaxform ) Examples of deductible transportation. 1040eztaxform   The following examples show when you can deduct transportation expenses based on the location of your work and your home. 1040eztaxform Example 1. 1040eztaxform You regularly work in an office in the city where you live. 1040eztaxform Your employer sends you to a 1-week training session at a different office in the same city. 1040eztaxform You travel directly from your home to the training location and return each day. 1040eztaxform You can deduct the cost of your daily round-trip transportation between your home and the training location. 1040eztaxform Example 2. 1040eztaxform Your principal place of business is in your home. 1040eztaxform You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. 1040eztaxform Example 3. 1040eztaxform You have no regular office, and you do not have an office in your home. 1040eztaxform In this case, the location of your first business contact inside the metropolitan area is considered your office. 1040eztaxform Transportation expenses between your home and this first contact are nondeductible commuting expenses. 1040eztaxform Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. 1040eztaxform While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. 1040eztaxform Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. 1040eztaxform You generally can use one of the two following methods to figure your deductible expenses. 1040eztaxform Standard mileage rate. 1040eztaxform Actual car expenses. 1040eztaxform If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. 1040eztaxform See Leasing a Car , later. 1040eztaxform In this publication, “car” includes a van, pickup, or panel truck. 1040eztaxform For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. 1040eztaxform Rural mail carriers. 1040eztaxform   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. 1040eztaxform Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. 1040eztaxform   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). 1040eztaxform You must complete Form 2106 and attach it to your Form 1040, U. 1040eztaxform S. 1040eztaxform Individual Income Tax Return. 1040eztaxform   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. 1040eztaxform It is given as an equipment maintenance allowance (EMA) to employees of the U. 1040eztaxform S. 1040eztaxform Postal Service. 1040eztaxform It is at the rate contained in the 1991 collective bargaining agreement. 1040eztaxform Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. 1040eztaxform See your employer for information on your reimbursement. 1040eztaxform    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. 1040eztaxform Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. 1040eztaxform For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. 1040eztaxform If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. 1040eztaxform You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. 1040eztaxform See Choosing the standard mileage rate and Standard mileage rate not allowed, later. 1040eztaxform You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. 1040eztaxform See chapter 6 for more information on reimbursements . 1040eztaxform Choosing the standard mileage rate. 1040eztaxform   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. 1040eztaxform Then, in later years, you can choose to use either the standard mileage rate or actual expenses. 1040eztaxform   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. 1040eztaxform For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. 1040eztaxform   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. 1040eztaxform You cannot revoke the choice. 1040eztaxform However, in later years, you can switch from the standard mileage rate to the actual expenses method. 1040eztaxform If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. 1040eztaxform Example. 1040eztaxform Larry is an employee who occasionally uses his own car for business purposes. 1040eztaxform He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. 1040eztaxform Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. 1040eztaxform   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. 1040eztaxform Standard mileage rate not allowed. 1040eztaxform   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. 1040eztaxform (See Rural mail carriers , earlier. 1040eztaxform ) Note. 1040eztaxform You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. 1040eztaxform Five or more cars. 1040eztaxform   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. 1040eztaxform However, you may be able to deduct your actual expenses for operating each of the cars in your business. 1040eztaxform See Actual Car Expenses , later, for information on how to figure your deduction. 1040eztaxform   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. 1040eztaxform   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. 1040eztaxform Example 1. 1040eztaxform Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. 1040eztaxform She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. 1040eztaxform Example 2. 1040eztaxform Tony and his employees use his four pickup trucks in his landscaping business. 1040eztaxform During the year, he traded in two of his old trucks for two newer ones. 1040eztaxform Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. 1040eztaxform Example 3. 1040eztaxform Chris owns a repair shop and an insurance business. 1040eztaxform He and his employees use his two pickup trucks and van for the repair shop. 1040eztaxform Chris alternates using his two cars for the insurance business. 1040eztaxform No one else uses the cars for business purposes. 1040eztaxform Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. 1040eztaxform Example 4. 1040eztaxform Maureen owns a car and four vans that are used in her housecleaning business. 1040eztaxform Her employees use the vans, and she uses the car to travel to various customers. 1040eztaxform Maureen cannot use the standard mileage rate for the car or the vans. 1040eztaxform This is because all five vehicles are used in Maureen's business at the same time. 1040eztaxform She must use actual expenses for all vehicles. 1040eztaxform Interest. 1040eztaxform   If you are an employee, you cannot deduct any interest paid on a car loan. 1040eztaxform This applies even if you use the car 100% for business as an employee. 1040eztaxform   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. 1040eztaxform For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). 1040eztaxform You cannot deduct the part of the interest expense that represents your personal use of the car. 1040eztaxform    If you use a home equity loan to purchase your car, you may be able to deduct the interest. 1040eztaxform See Publication 936, Home Mortgage Interest Deduction, for more information. 1040eztaxform Personal property taxes. 1040eztaxform   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. 1040eztaxform You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. 1040eztaxform   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). 1040eztaxform If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). 1040eztaxform Parking fees and tolls. 1040eztaxform   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. 1040eztaxform (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. 1040eztaxform ) Sale, trade-in, or other disposition. 1040eztaxform   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. 1040eztaxform See Disposition of a Car , later. 1040eztaxform Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. 1040eztaxform If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. 1040eztaxform Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. 1040eztaxform Continue to keep records, as explained later in chapter 5 . 1040eztaxform Business and personal use. 1040eztaxform   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. 1040eztaxform You can divide your expense based on the miles driven for each purpose. 1040eztaxform Example. 1040eztaxform You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. 1040eztaxform You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. 1040eztaxform Employer-provided vehicle. 1040eztaxform   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. 1040eztaxform You cannot use the standard mileage rate. 1040eztaxform See Vehicle Provided by Your Employer in chapter 6. 1040eztaxform Interest on car loans. 1040eztaxform   If you are an employee, you cannot deduct any interest paid on a car loan. 1040eztaxform This interest is treated as personal interest and is not deductible. 1040eztaxform If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. 1040eztaxform Taxes paid on your car. 1040eztaxform   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. 1040eztaxform Enter the amount paid on line 7 of Schedule A (Form 1040). 1040eztaxform Sales taxes. 1040eztaxform   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. 1040eztaxform Fines and collateral. 1040eztaxform   You cannot deduct fines you pay or collateral you forfeit for traffic violations. 1040eztaxform Casualty and theft losses. 1040eztaxform   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. 1040eztaxform See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. 1040eztaxform Depreciation and section 179 deductions. 1040eztaxform   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. 1040eztaxform Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. 1040eztaxform However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. 1040eztaxform Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. 1040eztaxform The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. 1040eztaxform   Generally, there are limits on these deductions. 1040eztaxform Special rules apply if you use your car 50% or less in your work or business. 1040eztaxform   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. 1040eztaxform   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. 1040eztaxform Car defined. 1040eztaxform   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. 1040eztaxform Its unloaded gross vehicle weight must not be more than 6,000 pounds. 1040eztaxform A car includes any part, component, or other item physically attached to it or usually included in the purchase price. 1040eztaxform   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. 1040eztaxform Qualified nonpersonal use vehicles. 1040eztaxform   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. 1040eztaxform They include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. 1040eztaxform Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. 1040eztaxform More information. 1040eztaxform   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. 1040eztaxform Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. 1040eztaxform If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. 1040eztaxform There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. 1040eztaxform See Depreciation Limits, later. 1040eztaxform You can claim the section 179 deduction only in the year you place the car in service. 1040eztaxform For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. 1040eztaxform Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. 1040eztaxform A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. 1040eztaxform Example. 1040eztaxform In 2012, you bought a new car and used it for personal purposes. 1040eztaxform In 2013, you began to use it for business. 1040eztaxform Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. 1040eztaxform However, you can claim a depreciation deduction for the business use of the car starting in 2013. 1040eztaxform See Depreciation Deduction , later. 1040eztaxform More than 50% business use requirement. 1040eztaxform   You must use the property more than 50% for business to claim any section 179 deduction. 1040eztaxform If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. 1040eztaxform The result is the cost of the property that can qualify for the section 179 deduction. 1040eztaxform Example. 1040eztaxform Peter purchased a car in April 2013 for $24,500 and used it 60% for business. 1040eztaxform Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). 1040eztaxform But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. 1040eztaxform Limits. 1040eztaxform   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. 1040eztaxform Limit on the amount of the section 179 deduction. 1040eztaxform   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. 1040eztaxform   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. 1040eztaxform If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. 1040eztaxform   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. 1040eztaxform   If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. 1040eztaxform   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. 1040eztaxform You must allocate the dollar limit (after any reduction) between you. 1040eztaxform   For more information on the above section 179 deduction limits, see Publication 946. 1040eztaxform Limit for sport utility and certain other vehicles. 1040eztaxform   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. 1040eztaxform This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. 1040eztaxform However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. 1040eztaxform    Limit on total section 179, special depreciation allowance, and depreciation deduction. 1040eztaxform   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. 1040eztaxform The limit is reduced if your business use of the car is less than 100%. 1040eztaxform See Depreciation Limits , later, for more information. 1040eztaxform Example. 1040eztaxform In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. 1040eztaxform However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). 1040eztaxform Cost of car. 1040eztaxform   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. 1040eztaxform For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. 1040eztaxform Your cost includes only the cash you paid. 1040eztaxform Basis of car for depreciation. 1040eztaxform   The amount of the section 179 deduction reduces your basis in your car. 1040eztaxform If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. 1040eztaxform The resulting amount is the basis in your car you use to figure your depreciation deduction. 1040eztaxform When to choose. 1040eztaxform   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. 1040eztaxform How to choose. 1040eztaxform    Employees use Form 2106 to make this choice and report the section 179 deduction. 1040eztaxform All others use Form 4562. 1040eztaxform   File the appropriate form with either of the following. 1040eztaxform Your original tax return filed for the year the property was placed in service (whether or not you file it timely). 1040eztaxform An amended return filed within the time prescribed by law. 1040eztaxform An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. 1040eztaxform The amended return must also include any resulting adjustments to taxable income. 1040eztaxform    You must keep records that show the specific identification of each piece of qualifying section 179 property. 1040eztaxform These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. 1040eztaxform Revoking an election. 1040eztaxform   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. 1040eztaxform Recapture of section 179 deduction. 1040eztaxform   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. 1040eztaxform If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. 1040eztaxform Any section 179 deduction claimed on the car is included in calculating the excess depreciation. 1040eztaxform For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. 1040eztaxform Dispositions. 1040eztaxform   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. 1040eztaxform You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). 1040eztaxform For information on the disposition of a car, see Disposition of a Car , later. 1040eztaxform Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. 1040eztaxform The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). 1040eztaxform The special depreciation allowance applies only for the first year the car is placed in service. 1040eztaxform To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). 1040eztaxform Combined depreciation. 1040eztaxform   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). 1040eztaxform For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). 1040eztaxform See Depreciation Limits , later in this chapter. 1040eztaxform Qualified car. 1040eztaxform   To be a qualified car (including trucks and vans), the car must meet all of the following tests. 1040eztaxform You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. 1040eztaxform Election not to claim the special depreciation allowance. 1040eztaxform   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. 1040eztaxform If you make this election, it applies to all 5-year property placed in service during the year. 1040eztaxform   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. 1040eztaxform    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. 1040eztaxform Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. 1040eztaxform This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. 1040eztaxform You generally need to know the following things about the car you intend to depreciate. 1040eztaxform Your basis in the car. 1040eztaxform The date you place the car in service. 1040eztaxform The method of depreciation and recovery period you will use. 1040eztaxform Basis. 1040eztaxform   Your basis in a car for figuring depreciation is generally its cost. 1040eztaxform This includes any amount you borrow or pay in cash, other property, or services. 1040eztaxform   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). 1040eztaxform However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). 1040eztaxform For one of these situations see Exception under Methods of depreciation, later. 1040eztaxform   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. 1040eztaxform Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . 1040eztaxform Placed in service. 1040eztaxform   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. 1040eztaxform Depreciation begins when the car is placed in service for use in your work or business or for the production of income. 1040eztaxform   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. 1040eztaxform Car placed in service and disposed of in the same year. 1040eztaxform   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. 1040eztaxform Methods of depreciation. 1040eztaxform   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). 1040eztaxform MACRS is discussed later in this chapter. 1040eztaxform Exception. 1040eztaxform   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. 1040eztaxform You must use straight line depreciation over the estimated remaining useful life of the car. 1040eztaxform   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. 1040eztaxform The rate per mile varies depending on the year(s) you used the standard mileage rate. 1040eztaxform For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. 1040eztaxform   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . 1040eztaxform You must use your adjusted basis in your car to figure your depreciation deduction. 1040eztaxform For additional information on the straight line method of depreciation, see Publication 946. 1040eztaxform More-than-50%-use test. 1040eztaxform   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. 1040eztaxform You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. 1040eztaxform   If your business use is 50% or less, you must use the straight line method to depreciate your car. 1040eztaxform This is explained later under Car Used 50% or Less for Business . 1040eztaxform Qualified business use. 1040eztaxform   A qualified business use is any use in your trade or business. 1040eztaxform It does not include use for the production of income (investment use). 1040eztaxform However, you do combine your business and investment use to compute your depreciation deduction for the tax year. 1040eztaxform Use of your car by another person. 1040eztaxform   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. 1040eztaxform It is directly connected with your business. 1040eztaxform It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). 1040eztaxform It results in a payment of fair market rent. 1040eztaxform This includes any payment to you for the use of your car. 1040eztaxform Business use changes. 1040eztaxform   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. 1040eztaxform See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. 1040eztaxform    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. 1040eztaxform Use for more than one purpose. 1040eztaxform   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. 1040eztaxform You do this on the basis of mileage. 1040eztaxform Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. 1040eztaxform Change from personal to business use. 1040eztaxform   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. 1040eztaxform In this case, you figure the percentage of business use for the year as follows. 1040eztaxform Determine the percentage of business use for the period following the change. 1040eztaxform Do this by dividing business miles by total miles driven during that period. 1040eztaxform Multiply the percentage in (1) by a fraction. 1040eztaxform The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. 1040eztaxform Example. 1040eztaxform You use a car only for personal purposes during the first 6 months of the year. 1040eztaxform During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. 1040eztaxform This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. 1040eztaxform Your business use for the year is 40% (80% × 6/12). 1040eztaxform Limits. 1040eztaxform   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. 1040eztaxform The maximum amount you can claim depends on the year in which you placed your car in service. 1040eztaxform You have to reduce the maximum amount if you did not use the car exclusively for business. 1040eztaxform See Depreciation Limits , later. 1040eztaxform Unadjusted basis. 1040eztaxform   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . 1040eztaxform Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. 1040eztaxform   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. 1040eztaxform Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. 1040eztaxform Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. 1040eztaxform Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. 1040eztaxform 1, 2006), and alternative motor vehicle credit. 1040eztaxform   See Form 8910 for information on the alternative motor vehicle credit. 1040eztaxform If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. 1040eztaxform See Car Used 50% or Less for Business, later, for more information. 1040eztaxform If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. 1040eztaxform Improvements. 1040eztaxform   A major improvement to a car is treated as a new item of 5-year recovery property. 1040eztaxform It is treated as placed in service in the year the improvement is made. 1040eztaxform It does not matter how old the car is when the improvement is added. 1040eztaxform Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. 1040eztaxform However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. 1040eztaxform Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. 1040eztaxform See Depreciation Limits , later. 1040eztaxform Car trade-in. 1040eztaxform   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. 1040eztaxform You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. 1040eztaxform If you make this election, you treat the old car as disposed of at the time of the trade-in. 1040eztaxform The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. 1040eztaxform You then figure your depreciation deduction for the new car beginning with the date you placed it in service. 1040eztaxform You make this election by completing Form 2106, Part II, Section D. 1040eztaxform This method is explained later, beginning at Effect of trade-in on basis . 1040eztaxform If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. 1040eztaxform You must apply two depreciation limits (see Depreciation Limits , later). 1040eztaxform The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. 1040eztaxform The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. 1040eztaxform You must use Form 4562 to compute your depreciation deduction. 1040eztaxform You cannot use Form 2106, Part II, Section D. 1040eztaxform This method is explained in Publication 946. 1040eztaxform   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). 1040eztaxform Otherwise, you must use the method described in (2). 1040eztaxform Effect of trade-in on basis. 1040eztaxform   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. 1040eztaxform For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. 1040eztaxform 168(i)-6(d)(3). 1040eztaxform Traded car used only for business. 1040eztaxform   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. 1040eztaxform Example. 1040eztaxform Paul trades in a car that has an adjusted basis of $5,000 for a new car. 1040eztaxform In addition, he pays cash of $20,000 for the new car. 1040eztaxform His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). 1040eztaxform Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. 1040eztaxform Traded car used partly in business. 1040eztaxform   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. 1040eztaxform This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. 1040eztaxform (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. 1040eztaxform See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. 1040eztaxform )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. 1040eztaxform Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. 1040eztaxform For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. 1040eztaxform Modified Accelerated Cost Recovery System (MACRS). 1040eztaxform   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. 1040eztaxform   The maximum amount you can deduct is limited, depending on the year you placed your car in service. 1040eztaxform See Depreciation Limits , later. 1040eztaxform Recovery period. 1040eztaxform   Under MACRS, cars are classified as 5-year property. 1040eztaxform You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. 1040eztaxform This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. 1040eztaxform Depreciation deduction for certain Indian reservation property. 1040eztaxform   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. 1040eztaxform The recovery that applies for a business-use car is 3 years instead of 5 years. 1040eztaxform However, the depreciation limits, discussed later, will still apply. 1040eztaxform   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. 1040eztaxform Depreciation methods. 1040eztaxform   You can use one of the following methods to depreciate your car. 1040eztaxform The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. 1040eztaxform The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. 1040eztaxform The straight line method (SL) over a 5-year recovery period. 1040eztaxform    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. 1040eztaxform This is because the chart has the switch to the straight line method built into its rates. 1040eztaxform   Before choosing a method, you may wish to consider the following facts. 1040eztaxform Using the straight line method provides equal yearly deductions throughout the recovery period. 1040eztaxform Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. 1040eztaxform MACRS depreciation chart. 1040eztaxform   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . 1040eztaxform Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. 1040eztaxform A similar chart appears in the Instructions for Form 2106. 1040eztaxform    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. 1040eztaxform   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. 1040eztaxform You file your return on a fiscal year basis. 1040eztaxform You file your return for a short tax year (less than 12 months). 1040eztaxform During the year, all of the following conditions apply. 1040eztaxform You placed some property in service from January through September. 1040eztaxform You placed some property in service from October through December. 1040eztaxform Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. 1040eztaxform   You placed qualified property in service on an Indian reservation. 1040eztaxform Depreciation in future years. 1040eztaxform   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. 1040eztaxform However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. 1040eztaxform In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. 1040eztaxform See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. 1040eztaxform    In future years, do not use the chart in this edition of the publication. 1040eztaxform Instead, use the chart in the publication or the form instructions for those future years. 1040eztaxform Disposition of car during recovery period. 1040eztaxform   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. 1040eztaxform See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. 1040eztaxform How to use the 2013 chart. 1040eztaxform   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. 1040eztaxform Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. 1040eztaxform If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. 1040eztaxform    Your deduction cannot be more than the maximum depreciation limit for cars. 1040eztaxform See Depreciation Limits, later. 1040eztaxform Example. 1040eztaxform Phil bought a used truck in February 2012 to use exclusively in his landscape business. 1040eztaxform He paid $9,200 for the truck with no trade-in. 1040eztaxform Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. 1040eztaxform Phil used the MACRS depreciation chart in 2012 to find his percentage. 1040eztaxform The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. 1040eztaxform He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. 1040eztaxform In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. 1040eztaxform His records show that the business use of his truck was 90% in 2013. 1040eztaxform Phil used Table 4-1 to find his percentage. 1040eztaxform Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. 1040eztaxform He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. 1040eztaxform Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. 1040eztaxform The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. 1040eztaxform The maximum amount you can deduct each year depends on the year you place the car in service. 1040eztaxform These limits are shown in the following tables. 1040eztaxform   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 10,9603 4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. 1040eztaxform 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. 1040eztaxform 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. 1040eztaxform 4$7,660 if you acquired the car before 5/6/2003. 1040eztaxform $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. 1040eztaxform 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. 1040eztaxform Trucks and vans. 1040eztaxform   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. 1040eztaxform A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. 1040eztaxform For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. 1040eztaxform Maximum Depreciation Deduction for Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 $11,3601 $5,300 $3,150 $1,875 2011 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. 1040eztaxform 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. 1040eztaxform Car used less than full year. 1040eztaxform   The depreciation limits are not reduced if you use a car for less than a full year. 1040eztaxform This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. 1040eztaxform However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. 1040eztaxform See Reduction for personal use , next. 1040eztaxform Reduction for personal use. 1040eztaxform   The depreciation limits are reduced based on your percentage of personal use. 1040eztaxform If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. 1040eztaxform Section 179 deduction. 1040eztaxform   The section 179 deduction is treated as a depreciation deduction. 1040eztaxform If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. 1040eztaxform Example. 1040eztaxform On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. 1040eztaxform He used it 80% for his business, and he chooses to take a section 179 deduction for the car. 1040eztaxform The car is not qualified property for purposes of the special depreciation allowance. 1040eztaxform Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. 1040eztaxform This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). 1040eztaxform Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). 1040eztaxform He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. 1040eztaxform Jack has reached his maximum depreciation deduction for 2013. 1040eztaxform For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. 1040eztaxform Deductions in years after the recovery period. 1040eztaxform   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. 1040eztaxform If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. 1040eztaxform Unrecovered basis. 1040eztaxform   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. 1040eztaxform The recovery period. 1040eztaxform   For 5-year property, your recovery period is 6 calendar years. 1040eztaxform A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. 1040eztaxform   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. 1040eztaxform You determine your unrecovered basis in the 7th year after you placed the car in service. 1040eztaxform How to treat unrecovered basis. 1040eztaxform   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. 1040eztaxform The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. 1040eztaxform For example, no deduction is allowed for a year you use your car 100% for personal purposes. 1040eztaxform Example. 1040eztaxform In April 2007, Bob bought and placed in service a car he used exclusively in his business. 1040eztaxform The car cost $31,500. 1040eztaxform Bob did not claim a section 179 deduction or the special depreciation allowance for the car. 1040eztaxform He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). 1040eztaxform For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. 1040eztaxform Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. 1040eztaxform      MACRS     Deprec. 1040eztaxform Year % Amount Limit Allowed 2007 20. 1040eztaxform 00 $6,300 $3,060 $ 3,060 2008 32. 1040eztaxform 00 10,080 4,900 4,900 2009 19. 1040eztaxform 20 6,048 2,850 2,850 2010 11. 1040eztaxform 52 3,629 1,775 1,775 2011 11. 1040eztaxform 52 3,629 1,775 1,775 2012 5. 1040eztaxform 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. 1040eztaxform   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). 1040eztaxform If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. 1040eztaxform   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. 1040eztaxform However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. 1040eztaxform For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. 1040eztaxform Table 4-1. 1040eztaxform 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. 1040eztaxform ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. 1040eztaxform   First, using the left column, find the date you first placed the car in service in 2013. 1040eztaxform Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. 1040eztaxform For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. 1040eztaxform Refer back to the MACRS Depreciation Chart for the year you placed the car in service. 1040eztaxform (See Car Used 50% or Less for Business . 1040eztaxform )  Multiply the unadjusted basis of your car by your business use percentage. 1040eztaxform Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. 1040eztaxform (Also see Depreciation Limits . 1040eztaxform )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. 1040eztaxform 1—Sept. 1040eztaxform 30 percentage instead of the Oct. 1040eztaxform 1—Dec. 1040eztaxform 31 percentage for your car. 1040eztaxform               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. 1040eztaxform If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. 1040eztaxform 1—Sept. 1040eztaxform 30 for figuring depreciation for your car. 1040eztaxform See Which Convention Applies? in chapter 4 of Publication 946 for more details. 1040eztaxform               Example. 1040eztaxform You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. 1040eztaxform You
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1040eztaxform Publication 584-B - Introductory Material Table of Contents What's New Introduction What's New The IRS has created a page on IRS. 1040eztaxform gov for information about Publication 584-B, at www. 1040eztaxform irs. 1040eztaxform gov/pub584b. 1040eztaxform Information about any future developments affecting Publication 584-B (such as legislation enacted after we released it) will be posted on that page. 1040eztaxform Introduction This workbook is designed to help you figure your loss on business and income-producing property in the event of a disaster, casualty, or theft. 1040eztaxform It contains schedules to help you figure the loss to your office furniture and fixtures, information systems, motor vehicles, office supplies, buildings, and equipment. 1040eztaxform These schedules, however, are for your information only. 1040eztaxform You must complete Form 4684, Casualties and Thefts, to report your loss. 1040eztaxform Prev  Up  Next   Home   More Online Publications