IRS Issues New 2022 Rules for Passenger Car Depreciation
The IRS has provided updated tables containing:
1. Depreciation deduction limits for passenger automobiles placed in service in 2022, and
2. Dollar amounts that must be used to determine the annual income inclusion amounts for such vehicles first leased in 2022.Updated tables. Rev Proc 2022-17 contains three tables:
· Table 1 provides depreciation deduction limits for passenger automobiles acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during calendar year 2022, to which the additional first-year depreciation deduction applies.
REV. PROC. 2022-17 TABLE 1
DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES ACQUIRED
AFTER SEPTEMBER 27, 2017, AND PLACED IN SERVICE DURING CALENDAR
YEAR 2022, FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION
DEDUCTION APPLIES
Tax Year Amount
1st Tax Year $ 19,200
2nd Tax Year $ 18,000
3rd Tax Year $ 10,800
Each Succeeding Year $ 6,460
Table 2 provides depreciation deduction limits for passenger automobiles placed in service by the taxpayer during calendar year 2022, for which the taxpayer isn’t entitled to an additional first-year depreciation deduction.
1st Tax Year $ 11,200
2nd Tax Year $ 18,000
3rd Tax Year $ 10,800
Each Succeeding Year $ 6,460
· Table 3 provides a taxpayer who leases a passenger automobile (with a lease term beginning in 2022) with the dollar amount to be used to determine the “income inclusion amount” for that automobile. The table provides dollar amounts for a range of fair market values. https://www.irs.gov/pub/irs-drop/rp-22-17.pdf
Additional first-year depreciation deduction
Taxpayers with qualified property (including passenger automobiles) may claim an additional first-year depreciation deduction equal to 100% for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. (Code Sec. 168(k)(6)(A))
An additional first-year depreciation deduction is not allowed if, in 2022, the taxpayer:
1. Used the passenger automobile less than 50% for business purposes;
2. Elected out of taking an additional first-year depreciation deduction;
3. Acquired the passenger automobile used and the acquisition didn’t meet certain requirements; or
4. Acquired the passenger automobile before September 28, 2017, and placed it in service after 2019. (Code Sec. 168(k))
Income inclusion amount. Code Sec. 280F(c)(2) reduces the amount allowable as a depreciation deduction to a taxpayer who leases a passenger automobile. This reduction is substantially equivalent to the depreciation deduction limits imposed on taxpayers who own passenger automobiles. (Code Sec. 280F(c)(3))
To accomplish this reduction, taxpayer lessees must include in gross income an amount (“income inclusion amount”) determined by applying a formula to a dollar amount obtained from a table. (Reg. §1.280F-7(a))
Effective date. The Revenue Procedure applies to automobiles placed in service during the calendar year 2022 or with a lease term beginning in the calendar year 2022.
