Tax News

CCH (cch.taxgroup.com) reports:

  Working with the "new cars" and "new trucks" components of the October 2009 Consumer Price Index, CCH has calculated the unofficial depreciation limits on automobiles first put into use during the 2010 tax year for business and investment purposes. Based on those inflation-adjusted computations (as specified under Code Sec. 280F(d)(7)(), the 2010 Code Sec. 280F limits on the amounts of depreciation deductions for passenger automobiles will rise from 2009 levels (after remaining stagnant for the 2008-2009 period). The 2010 depreciation limits for trucks and vans will also rise from 2009 levels (after having dropped in 2009 from 2008 levels).

  CCH Comment. The truck index for October 2009, upon which the 2010 truck and van depreciation amounts are computed, was 140.897, once again on the rise after seeing the October 2007 level of 139.513 drop to 133.640 for October 2008. For the same periods, the car index rose to 137.851 in October 2009 after falling from 135.169 to 134.837 between 2007 and 2008.

  CCH Comment. The IRS officially announced the depreciation limits for 2009 in April 2009. The expectation is that the IRS will release the 2010 figures under a similar timetable.

  CCH Comment. Congress, to date, has not extended 2009 bonus depreciation into 2010 for vehicles placed in service in 2010. Bonus depreciation (which is elective) has allowed taxpayers in 2009 to add another $8,000 to the maximum first-year depreciation limits ($10,960 for new passenger automobiles and $11,060 for qualifying new trucks/vans).

Passenger Auto Depreciation Caps

  The unofficial annual maximum depreciation amounts for passenger automobiles first placed in service in calendar year 2010 are:

  $3,060 for the first tax year (up from $2,960 in 2008 and 2009);

  $4,900 for the second tax year (up from $4,800 in 2008 and 2009);

  $2,950 for the third tax year (up from $2,850 in 2008 and 2009); and

  $1,775 for each tax year thereafter (same as 2008 and 2009 due to rounding rules).

Depreciation Caps for Trucks and Vans

  The indexing computations under Code Sec. 280F typically call for a higher depreciation deduction for trucks and vans. The computations for 2010 follow that pattern. The unofficial 2010 amounts are projected to be:

  $3,160 for the first tax year (up from $3,060 in 2009, and back to the same level as in 2008);

  $5,100 for the second tax year (up from $4,900 in 2009, and back to the same level as in 2008);

  $3,050 for the third tax year (up from $2,950 in 2009, and back to the same level as in 2008); and

  $1,875 for each tax year thereafter (up from $1,775 in 2009, and back to the same level as in 2008).

  To qualify for the truck and van depreciation deduction, a vehicle must be a passenger vehicle built on a truck chassis with an unloaded gross weight of over 6,000 pounds. A vehicle built on an automobile chassis is classified as an automobile, regardless of weight and even if its manufacturer calls it an SUV.

  By George Jones, CCH News Staff