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2009 1040x

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2009 1040x

2009 1040x 6. 2009 1040x   Retail Tax on Heavy Trucks, Trailers, and Tractors Table of Contents Highway vehicle. 2009 1040x Vehicles not considered highway vehicles. 2009 1040x Idling reduction device. 2009 1040x Separate purchase. 2009 1040x Leases. 2009 1040x Exported vehicle. 2009 1040x Tax on resale of tax-paid trailers and semitrailers. 2009 1040x Use treated as sale. 2009 1040x Sale. 2009 1040x Long-term lease. 2009 1040x Short-term lease. 2009 1040x Related person. 2009 1040x Exclusions from tax base. 2009 1040x Sales not at arm's length. 2009 1040x Installment sales. 2009 1040x Repairs and modifications. 2009 1040x Further manufacture. 2009 1040x Rail trailers and rail vans. 2009 1040x Parts and accessories. 2009 1040x Trash containers. 2009 1040x House trailers. 2009 1040x Camper coaches or bodies for self-propelled mobile homes. 2009 1040x Farm feed, seed, and fertilizer equipment. 2009 1040x Ambulances and hearses. 2009 1040x Truck-tractors. 2009 1040x Concrete mixers. 2009 1040x Registration requirement. 2009 1040x Further manufacture. 2009 1040x A tax of 12% of the sales price is imposed on the first retail sale of the following articles, including related parts and accessories sold on or in connection with, or with the sale of, the articles. 2009 1040x Truck chassis and bodies. 2009 1040x Truck trailer and semitrailer chassis and bodies. 2009 1040x Tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. 2009 1040x A truck is a highway vehicle primarily designed to transport its load on the same chassis as the engine, even if it is equipped to tow a vehicle, such as a trailer or semitrailer. 2009 1040x A tractor is a highway vehicle designed to tow a vehicle, such as a trailer or semitrailer. 2009 1040x A tractor may carry incidental items of cargo when towing or limited amounts of cargo when not towing. 2009 1040x A sale of a truck, truck trailer, or semitrailer is considered a sale of a chassis and a body. 2009 1040x The seller is liable for the tax. 2009 1040x Chassis or body. 2009 1040x   A chassis or body is taxable only if you sell it for use as a component part of a highway vehicle that is a truck, truck trailer or semitrailer, or a tractor of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. 2009 1040x Highway vehicle. 2009 1040x   A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it is also designed to perform other functions. 2009 1040x Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. 2009 1040x A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation function for only one of the following. 2009 1040x A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). 2009 1040x A special kind of cargo, goods, supplies, or materials. 2009 1040x Some off-highway task unrelated to highway transportation, except as discussed next. 2009 1040x Vehicles not considered highway vehicles. 2009 1040x   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the retail tax. 2009 1040x Specially designed mobile machinery for nontransportation functions. 2009 1040x A self-propelled vehicle is not a highway vehicle if all the following apply. 2009 1040x The chassis has permanently mounted to it machinery or equipment used to perform certain operations (construction, manufacturing, drilling, mining, timbering, processing, farming, or similar operations) if the operation of the machinery or equipment is unrelated to transportation on or off the public highways. 2009 1040x The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if applicable) for the machinery or equipment, whether or not the machinery or equipment is in operation. 2009 1040x The chassis could not, because of its special design and without substantial structural modification, be used as part of a vehicle designed to carry any other load. 2009 1040x Vehicles specially designed for off-highway transportation. 2009 1040x A vehicle is not treated as a highway vehicle if the vehicle is specially designed for the primary function of transporting a particular type of load other than over the public highway and because of this special design, the vehicles's capability to transport a load over a public highway is substantially limited or impaired. 2009 1040x To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety, or other requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. 2009 1040x It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. 2009 1040x Nontransportation trailers and semitrailers. 2009 1040x A trailer or semitrailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway site. 2009 1040x For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle. 2009 1040x Gross vehicle weight. 2009 1040x   The tax does not apply to truck chassis and bodies suitable for use with a vehicle that has a gross vehicle weight (defined below) of 33,000 pounds or less. 2009 1040x It also does not apply to truck trailer and semitrailer chassis and bodies suitable for use with a trailer or semitrailer that has a gross vehicle weight of 26,000 pounds or less. 2009 1040x Tractors that have a gross vehicle weight of 19,500 pounds or less and a gross combined weight of 33,000 pounds or less are excluded from the 12% retail tax. 2009 1040x   The following four classifications of truck body types meet the suitable for use standard and will be excluded from the retail excise tax. 2009 1040x Platform truck bodies 21 feet or less in length. 2009 1040x Dry freight and refrigerated truck van bodies 24 feet or less in length. 2009 1040x Dump truck bodies with load capacities of 8 cubic yards or less. 2009 1040x Refuse packer truck bodies with load capacities of 20 cubic yards or less. 2009 1040x For more information on these classifications, see Revenue Procedure 2005-19, which is on page 832 of I. 2009 1040x R. 2009 1040x B. 2009 1040x 2005-14 at www. 2009 1040x irs. 2009 1040x gov/pub/irs-irbs/irb05-14. 2009 1040x pdf. 2009 1040x   The gross vehicle weight means the maximum total weight of a loaded vehicle. 2009 1040x Generally, this maximum total weight is the gross vehicle weight rating provided by the manufacturer or determined by the seller of the completed article. 2009 1040x The seller's gross vehicle weight rating is determined solely on the basis of the strength of the chassis frame and the axle capacity and placement. 2009 1040x The seller may not take into account any readily attachable components (such as tires or rim assemblies) in determining the gross vehicle weight. 2009 1040x See Regulations section 145. 2009 1040x 4051-1(e)(3) for more information. 2009 1040x Parts or accessories. 2009 1040x   The tax applies to parts or accessories sold on or in connection with, or with the sale of, a taxable article. 2009 1040x For example, if at the time of the sale by the retailer, the part or accessory has been ordered from the retailer, the part or accessory will be considered as sold in connection with the sale of the vehicle. 2009 1040x The tax applies in this case whether or not the retailer bills the parts or accessories separately. 2009 1040x   If the retailer sells a taxable chassis, body, or tractor without parts or accessories considered essential for the operation or appearance of the taxable article, the sale of the parts or accessories by the retailer to the purchaser is considered made in connection with the sale of the taxable article even though they are shipped separately, at the same time, or on a different date. 2009 1040x The tax applies unless there is evidence to the contrary. 2009 1040x For example, if a retailer sells to any person a chassis and the bumpers for the chassis, or sells a taxable tractor and the fifth wheel and attachments, the tax applies to the parts or accessories regardless of the method of billing or the time at which the shipments were made. 2009 1040x The tax does not apply to parts and accessories that are spares or replacements. 2009 1040x   The tax imposed on parts and accessories sold on or in connection with the taxable articles listed earlier and the tax imposed on the separate purchase of parts and accessories (discussed next) for the taxable articles listed earlier do not apply to an idling reduction device or insulation that has an R value of at least R35 per inch. 2009 1040x Idling reduction device. 2009 1040x   An idling reduction device is any device or system of devices that provide the tractor with services, such as heat, air conditioning, and electricity, without the use of the main drive engine while the tractor is temporarily parked or stationary. 2009 1040x The device must be affixed to the tractor and determined by the Administrator of the EPA, in consultation with the Secretary of Energy and Secretary of Transportation, to reduce idling while parked or stationary. 2009 1040x The EPA discusses idling reduction technologies on its website at www. 2009 1040x epa. 2009 1040x gov/smartway/technology/idling. 2009 1040x htm. 2009 1040x Separate purchase. 2009 1040x   The tax generally applies to the price of a part or accessory and its installation if the following conditions are met. 2009 1040x The owner, lessee, or operator of any vehicle that contains a taxable article installs any part or accessory on the vehicle. 2009 1040x The installation occurs within 6 months after the vehicle is first placed in service. 2009 1040x   The owners of the trade or business installing the parts or accessories are secondarily liable for the tax. 2009 1040x   A vehicle is placed in service on the date the owner takes actual possession of the vehicle. 2009 1040x This date is established by a signed delivery ticket or other comparable document indicating delivery to and acceptance by the owner. 2009 1040x   The tax does not apply if the installed part or accessory is a replacement part or accessory. 2009 1040x The tax also does not apply if the total price of the parts and accessories, including installation charges, during the 6-month period is $1,000 or less. 2009 1040x However, if the total price is more than $1,000, the tax applies to the cost of all parts and accessories (and installation charges) during that period. 2009 1040x Example. 2009 1040x You bought a taxable vehicle and placed it in service on April 8. 2009 1040x On May 3, you bought and installed parts and accessories at a cost of $850. 2009 1040x On July 15, you bought and installed parts and accessories for $300. 2009 1040x Tax of $138 (12% of $1,150) applies on July 15. 2009 1040x Also, tax will apply to any costs of additional parts and accessories installed on the vehicle before October 8. 2009 1040x First retail sale defined. 2009 1040x   The sale of an article is treated as the first retail sale, and the seller will be liable for the tax imposed on the sale unless one of the following exceptions applies. 2009 1040x There has been a prior taxable sale, lease, or use of the article (however, see Tax on resale of tax-paid trailers and semitrailers, later). 2009 1040x The sale qualifies as a tax-free sale under section 4221 (see Sales exempt from tax, later). 2009 1040x The seller in good faith accepts from the purchaser a statement signed under penalties of perjury and executed in good faith that the purchaser intends to resell the article or lease it on a long-term basis. 2009 1040x There is no registration requirement. 2009 1040x Leases. 2009 1040x   A long-term lease (a lease with a term of 1 year or more, taking into account options to renew) before a first retail sale is treated as a taxable sale. 2009 1040x The tax is imposed on the lessor at the time of the lease. 2009 1040x   A short-term lease (a lease with a term of less than 1 year, taking into account options to renew) before a first retail sale is treated as a taxable use. 2009 1040x The tax is imposed on the lessor at the time of the lease. 2009 1040x Exported vehicle. 2009 1040x   A vehicle exported before its first retail sale, used in a foreign country, and then returned to the United States is subject to the retail tax on its first domestic use or retail sale after importation. 2009 1040x Tax on resale of tax-paid trailers and semitrailers. 2009 1040x   The tax applies to a trailer or semitrailer resold within 6 months after having been sold in a taxable sale. 2009 1040x The seller liable for the tax on the resale can claim a credit equal to the tax paid on the prior taxable sale. 2009 1040x The credit cannot exceed the tax on the resale. 2009 1040x See Regulations section 145. 2009 1040x 4052-1(a)(4) for information on the conditions to allowance for the credit. 2009 1040x Use treated as sale. 2009 1040x   If any person uses a taxable article before the first retail sale of the article, that person is liable for the tax as if the article had been sold at retail by that person. 2009 1040x Figure the tax on the price at which similar articles are sold in the ordinary course of trade by retailers. 2009 1040x The tax attaches when the use begins. 2009 1040x   If the seller of an article regularly sells the articles at retail in arm's-length transactions, figure the tax on its use on the lowest established retail price for the articles in effect at the time of the taxable use. 2009 1040x   If the seller of an article does not regularly sell the articles at retail in arm's-length transactions, a constructive price on which the tax is figured will be determined by the IRS after considering the selling practices and price structures of sellers of similar articles. 2009 1040x   If a seller of an article incurs liability for tax on the use of the article and later sells or leases the article in a transaction that otherwise would be taxable, liability for tax is not incurred on the later sale or lease. 2009 1040x Presumptive retail sales price. 2009 1040x   There are rules to ensure that the tax base of transactions considered to be taxable sales includes either an actual or presumed markup percentage. 2009 1040x If the person liable for tax is the vehicle's manufacturer, producer, or importer, the following discussions show how you figure the presumptive retail sales price depending on the type of transaction and the persons involved in the transaction. 2009 1040x Table 6-1 outlines the appropriate tax base calculation for various transactions. 2009 1040x   The presumed markup percentage to be used for trucks and truck-tractors is 4%. 2009 1040x But for truck trailers and semitrailers and remanufactured trucks and tractors, the presumed markup percentage is zero. 2009 1040x Sale. 2009 1040x   For a taxable sale by a manufacturer, producer, importer, or related person, you generally figure the tax on a tax base of the sales price plus an amount equal to the presumed markup percentage times that sales price. 2009 1040x Long-term lease. 2009 1040x   In the case of a long-term lease by a manufacturer, producer, importer, or related person, figure the tax on a tax base of the constructive sales price plus an amount equal to the presumed markup percentage times the constructive sales price. 2009 1040x Short-term lease. 2009 1040x   When a manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a constructive sales price at which those or similar articles generally are sold in the ordinary course of trade by retailers. 2009 1040x   But if the lessor in this situation regularly sells articles at retail in arm's-length transactions, figure the tax on the lowest established retail price in effect at the time of the taxable use. 2009 1040x   If a person other than the manufacturer, producer, importer, or related person leases an article in a short-term lease considered a taxable use, figure the tax on a tax base of the price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor and a presumed markup percentage. 2009 1040x Related person. 2009 1040x   A related person is any member of the same controlled group as the manufacturer, producer, or importer. 2009 1040x Do not treat as a related person a person that sells the articles through a permanent retail establishment in the normal course of being a retailer if that person has records to prove the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. 2009 1040x Table 6-1. 2009 1040x Tax Base IF the transaction is a. 2009 1040x . 2009 1040x . 2009 1040x THEN figuring the base by using the. 2009 1040x . 2009 1040x . 2009 1040x Sale by the manufacturer, producer, importer, or related person Sales price plus (presumed markup percentage × sales price) Sale by the dealer Total consideration paid for the item including any charges incident to placing it in a condition ready for use Long-term lease by the manufacturer, producer, importer, or related person Constructive sales price plus (presumed markup percentage × constructive sales price) Short-term lease by the manufacturer, producer, importer, or related person Constructive sales price at which such or similar articles are sold Short-term lease by a lessor other than the manufacturer, producer, importer, or related person Price for which the article was sold to the lessor plus the cost of parts and accessories installed by the lessor plus a presumed markup percentage Short-term lease where the articles are regularly sold at arm's length Lowest established retail price in effect at the time of the taxable use General rule for sales by dealers to the consumer. 2009 1040x   For a taxable sale, other than a long-term lease, by a person other than a manufacturer, producer, importer, or related person, your tax base is the retail sales price as discussed next under Determination of tax base. 2009 1040x   When you sell an article to the consumer, generally you do not add a presumed markup to the tax base. 2009 1040x However, you do add a markup if all the following apply. 2009 1040x You do not perform any significant activities relating to the processing of the sale of a taxable article. 2009 1040x The main reason for processing the sale through you is to avoid or evade the presumed markup. 2009 1040x You do not have records proving that the article was sold for a price that included a markup equal to or greater than the presumed markup percentage. 2009 1040x In these situations, your tax base is the sales price plus an amount equal to the presumed markup percentage times that selling price. 2009 1040x Determination of tax base. 2009 1040x   These rules apply to both normal retail sales price and presumptive retail sales price computations. 2009 1040x To arrive at the tax base, the price is the total consideration paid (including trade-in allowance) for the item and includes any charge incident to placing the article in a condition ready for use. 2009 1040x However, see Presumptive retail sales price, earlier. 2009 1040x Exclusions from tax base. 2009 1040x   Exclude from the tax base the retail excise tax imposed on the sale. 2009 1040x Exclude any state or local retail sales tax if stated as a separate charge from the price whether the sales tax is imposed on the seller or purchaser. 2009 1040x Also exclude the value of any used component of the article furnished by the first user of the article. 2009 1040x   Exclude charges for transportation, delivery, insurance, and installation (other than installation charges for parts and accessories, discussed earlier) and other expenses incurred in connection with the delivery of an article to a purchaser. 2009 1040x These expenses are those incurred in delivery from the retail dealer to the customer. 2009 1040x In the case of delivery directly from the manufacturer to the dealer's customer, include the transportation and delivery charges to the extent the charges do not exceed what it would have cost to ship the article to the dealer. 2009 1040x   Exclude amounts charged for machinery or equipment that does not contribute to the highway transportation function of the vehicle, provided those charges are supported by adequate records. 2009 1040x For example, for an industrial vacuum loader vehicle, exclude amounts charged for the vacuum pump and hose, filter system, material separator, silencer or muffler, control cabinet, and ladder. 2009 1040x Similarly, for a sewer cleaning vehicle, exclude amounts charged for the high pressure water pump, hose components, and the vacuum pipe. 2009 1040x Sales not at arm's length. 2009 1040x   For any taxable article sold (not at arm's length) at less than the fair market price, figure the excise tax on the price for which similar articles are sold at retail in the ordinary course of trade. 2009 1040x   A sale is not at arm's length if either of the following apply. 2009 1040x One of the parties is controlled (in law or in fact) by the other or there is common control, whether or not the control is actually exercised to influence the sales price. 2009 1040x The sale is made under special arrangements between a seller and a purchaser. 2009 1040x Installment sales. 2009 1040x   If the first retail sale is an installment sale, or other form of sale in which the sales price is paid in installments, tax liability arises at the time of the sale. 2009 1040x The tax is figured on the entire sales price. 2009 1040x No part of the tax is deferred because the sales price is paid in installments. 2009 1040x Repairs and modifications. 2009 1040x   The tax does not apply to the sale or use of an article that has been repaired or modified unless the cost of the repairs and modifications is more than 75% of the retail price of a comparable new article. 2009 1040x This includes modifications that change the transportation function of an article or restore a wrecked article to a functional condition. 2009 1040x However, this exception generally does not apply to an article that was not subject to the tax when it was new. 2009 1040x Further manufacture. 2009 1040x   The tax does not apply to the use by a person of a taxable article as material in the manufacture or production of, or as a component part of, another article to be manufactured or produced by that person. 2009 1040x Do not treat a person as engaged in the manufacture of any article merely because that person combines the article with a: Coupling device (including any fifth wheel); Wrecker crane; Loading and unloading equipment (including any crane, hoist, winch, or power liftgate); Aerial ladder or tower; Ice and snow control equipment; Earth moving, excavation, and construction equipment; Spreader; Sleeper cab; Cab shield; or Wood or metal floor. 2009 1040x Combining an article with an item in this list does not give rise to taxability. 2009 1040x However, see Parts or accessories discussed earlier. 2009 1040x Articles exempt from tax. 2009 1040x   The tax on heavy trucks, trailers, and tractors does not apply to sales of the articles described in the following discussions. 2009 1040x Rail trailers and rail vans. 2009 1040x   This is any chassis or body of a trailer or semitrailer designed for use both as a highway vehicle and a railroad car (including any parts and accessories designed primarily for use on and in connection with it). 2009 1040x Do not treat a piggyback trailer or semitrailer as designed for use as a railroad car. 2009 1040x Parts and accessories. 2009 1040x   This is any part or accessory sold separately from the truck or trailer, except as described earlier under Parts or accessories and Separate purchase. 2009 1040x Trash containers. 2009 1040x   This is any box, container, receptacle, bin, or similar article that meets all the following conditions. 2009 1040x It is designed to be used as a trash container. 2009 1040x It is not designed to carry freight other than trash. 2009 1040x It is not designed to be permanently mounted on or affixed to a truck chassis or body. 2009 1040x House trailers. 2009 1040x   This is any house trailer (regardless of size) suitable for use in connection with either passenger automobiles or trucks. 2009 1040x Camper coaches or bodies for self-propelled mobile homes. 2009 1040x   This is any article designed to be mounted or placed on trucks, truck chassis, or automobile chassis and to be used primarily as living quarters or camping accommodations. 2009 1040x Further, the tax does not apply to chassis specifically designed and constructed to accommodate and transport self-propelled mobile home bodies. 2009 1040x Farm feed, seed, and fertilizer equipment. 2009 1040x   This is any body primarily designed to process or prepare, haul, spread, load, or unload feed, seed, or fertilizer to or on farms. 2009 1040x This exemption applies only to the farm equipment body (and parts and accessories) and not to the chassis upon which the farm equipment is mounted. 2009 1040x Ambulances and hearses. 2009 1040x   This is any ambulance, hearse, or combination ambulance-hearse. 2009 1040x Truck-tractors. 2009 1040x   This is any truck-tractor specifically designed for use in shifting semitrailers in and around freight yards and freight terminals. 2009 1040x Concrete mixers. 2009 1040x   This is any article designed to be placed or mounted on a truck, truck trailer, or semitrailer chassis to be used to process or prepare concrete. 2009 1040x This exemption does not apply to the chassis on which the article is mounted. 2009 1040x Sales exempt from tax. 2009 1040x   The following sales are ordinarily exempt from tax. 2009 1040x Sales to a state or local government for its exclusive use. 2009 1040x Sales to Indian tribal governments, but only if the transaction involves the exercise of an essential tribal government function. 2009 1040x Sales to a nonprofit educational organization for its exclusive use. 2009 1040x Sales to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. 2009 1040x Sales for use by the purchaser for further manufacture of other taxable articles (see below). 2009 1040x Sales for export or for resale by the purchaser to a second purchaser for export. 2009 1040x Sales to the United Nations for official use. 2009 1040x Registration requirement. 2009 1040x   In general, the seller and buyer must be registered for a sale to be tax free. 2009 1040x See the Form 637 instructions for more information. 2009 1040x Certain registration exceptions apply in the case of sales to state and local governments, sales to foreign purchasers for export, and sales for resale or long term leasing. 2009 1040x Further manufacture. 2009 1040x   If you buy articles tax free and resell or use them other than in the manufacture of another article, you are liable for the tax on their resale or use just as if you had manufactured and made the first retail sale of them. 2009 1040x Credits or refunds. 2009 1040x   A credit or refund (without interest) of the retail tax on the taxable articles described earlier may be allowable if the tax has been paid with respect to an article and, before any other use, such article is used by any person as a component part of another taxable article manufactured or produced. 2009 1040x The person using the article as a component part is eligible for the credit or refund. 2009 1040x   A credit or refund is allowable if, before any other use, an article is, by any person: Exported, Used or sold for use as supplies for vessels, Sold to a state or local government for its exclusive use, Sold to a nonprofit educational organization for its exclusive use, or Sold to a qualified blood collector organization (as defined under Communications Tax in chapter 4) for its exclusive use in the collection, storage, or transportation of blood. 2009 1040x A credit or refund is also allowable if there is a price readjustment by reason of the return or repossession of an article or by reason of a bona fide discount, rebate, or allowance. 2009 1040x   See also Conditions to allowance in chapter 5. 2009 1040x Tire credit. 2009 1040x   A credit is allowed against the retail tax on the taxable articles described earlier if taxable tires are sold on or in connection with the sale of the article. 2009 1040x The credit is equal to the manufacturers excise tax imposed on the taxable tires (discussed earlier). 2009 1040x This is the section 4051(d) taxable tire credit and is claimed on Schedule C (Form 720) for the same quarter for which the tax on the heavy vehicle is reported. 2009 1040x Prev  Up  Next   Home   More Online Publications
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The 2009 1040x

2009 1040x 4. 2009 1040x   Transportation Table of Contents Parking fees. 2009 1040x Advertising display on car. 2009 1040x Car pools. 2009 1040x Hauling tools or instruments. 2009 1040x Union members' trips from a union hall. 2009 1040x 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. 2009 1040x These expenses include the cost of transportation by air, rail, bus, taxi, etc. 2009 1040x , and the cost of driving and maintaining your car. 2009 1040x Transportation expenses include the ordinary and necessary costs of all of the following. 2009 1040x 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. 2009 1040x Tax home is defined in chapter 1. 2009 1040x Visiting clients or customers. 2009 1040x Going to a business meeting away from your regular workplace. 2009 1040x Getting from your home to a temporary workplace when you have one or more regular places of work. 2009 1040x These temporary workplaces can be either within the area of your tax home or outside that area. 2009 1040x Transportation expenses do not include expenses you have while traveling away from home overnight. 2009 1040x Those expenses are travel expenses discussed in chapter 1 . 2009 1040x However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. 2009 1040x See Car Expenses , later. 2009 1040x Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. 2009 1040x However, there may be exceptions to this general rule. 2009 1040x You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. 2009 1040x 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. 2009 1040x Illustration of transportation expenses. 2009 1040x    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. 2009 1040x You may want to refer to it when deciding whether you can deduct your transportation expenses. 2009 1040x Temporary work location. 2009 1040x   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. 2009 1040x   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. 2009 1040x   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. 2009 1040x   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. 2009 1040x It will not be treated as temporary after the date you determine it will last more than 1 year. 2009 1040x   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. 2009 1040x You may have deductible travel expenses as discussed in chapter 1 . 2009 1040x No regular place of work. 2009 1040x   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. 2009 1040x   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. 2009 1040x   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. 2009 1040x These are nondeductible commuting expenses. 2009 1040x Two places of work. 2009 1040x   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. 2009 1040x 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. 2009 1040x   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. 2009 1040x You cannot deduct them. 2009 1040x Armed Forces reservists. 2009 1040x   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. 2009 1040x You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . 2009 1040x   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. 2009 1040x In this case, your transportation generally is a nondeductible commuting expense. 2009 1040x 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. 2009 1040x   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. 2009 1040x   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. 2009 1040x These expenses are discussed in chapter 1 . 2009 1040x   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. 2009 1040x For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. 2009 1040x Commuting expenses. 2009 1040x   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. 2009 1040x These costs are personal commuting expenses. 2009 1040x You cannot deduct commuting expenses no matter how far your home is from your regular place of work. 2009 1040x You cannot deduct commuting expenses even if you work during the commuting trip. 2009 1040x Example. 2009 1040x You sometimes use your cell phone to make business calls while commuting to and from work. 2009 1040x Sometimes business associates ride with you to and from work, and you have a business discussion in the car. 2009 1040x These activities do not change the trip from personal to business. 2009 1040x You cannot deduct your commuting expenses. 2009 1040x Parking fees. 2009 1040x    Fees you pay to park your car at your place of business are nondeductible commuting expenses. 2009 1040x You can, however, deduct business-related parking fees when visiting a customer or client. 2009 1040x Advertising display on car. 2009 1040x   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. 2009 1040x If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. 2009 1040x Car pools. 2009 1040x   You cannot deduct the cost of using your car in a nonprofit car pool. 2009 1040x Do not include payments you receive from the passengers in your income. 2009 1040x These payments are considered reimbursements of your expenses. 2009 1040x However, if you operate a car pool for a profit, you must include payments from passengers in your income. 2009 1040x You can then deduct your car expenses (using the rules in this publication). 2009 1040x Hauling tools or instruments. 2009 1040x   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. 2009 1040x 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). 2009 1040x Union members' trips from a union hall. 2009 1040x   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. 2009 1040x Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. 2009 1040x Office in the home. 2009 1040x   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. 2009 1040x (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. 2009 1040x ) Examples of deductible transportation. 2009 1040x   The following examples show when you can deduct transportation expenses based on the location of your work and your home. 2009 1040x Example 1. 2009 1040x You regularly work in an office in the city where you live. 2009 1040x Your employer sends you to a 1-week training session at a different office in the same city. 2009 1040x You travel directly from your home to the training location and return each day. 2009 1040x You can deduct the cost of your daily round-trip transportation between your home and the training location. 2009 1040x Example 2. 2009 1040x Your principal place of business is in your home. 2009 1040x You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. 2009 1040x Example 3. 2009 1040x You have no regular office, and you do not have an office in your home. 2009 1040x In this case, the location of your first business contact inside the metropolitan area is considered your office. 2009 1040x Transportation expenses between your home and this first contact are nondeductible commuting expenses. 2009 1040x Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. 2009 1040x While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. 2009 1040x Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. 2009 1040x You generally can use one of the two following methods to figure your deductible expenses. 2009 1040x Standard mileage rate. 2009 1040x Actual car expenses. 2009 1040x 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. 2009 1040x See Leasing a Car , later. 2009 1040x In this publication, “car” includes a van, pickup, or panel truck. 2009 1040x For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. 2009 1040x Rural mail carriers. 2009 1040x   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. 2009 1040x Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. 2009 1040x   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). 2009 1040x You must complete Form 2106 and attach it to your Form 1040, U. 2009 1040x S. 2009 1040x Individual Income Tax Return. 2009 1040x   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. 2009 1040x It is given as an equipment maintenance allowance (EMA) to employees of the U. 2009 1040x S. 2009 1040x Postal Service. 2009 1040x It is at the rate contained in the 1991 collective bargaining agreement. 2009 1040x Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. 2009 1040x See your employer for information on your reimbursement. 2009 1040x    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. 2009 1040x 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. 2009 1040x For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. 2009 1040x If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. 2009 1040x You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. 2009 1040x See Choosing the standard mileage rate and Standard mileage rate not allowed, later. 2009 1040x 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. 2009 1040x See chapter 6 for more information on reimbursements . 2009 1040x Choosing the standard mileage rate. 2009 1040x   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. 2009 1040x Then, in later years, you can choose to use either the standard mileage rate or actual expenses. 2009 1040x   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. 2009 1040x 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. 2009 1040x   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. 2009 1040x You cannot revoke the choice. 2009 1040x However, in later years, you can switch from the standard mileage rate to the actual expenses method. 2009 1040x 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. 2009 1040x Example. 2009 1040x Larry is an employee who occasionally uses his own car for business purposes. 2009 1040x He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. 2009 1040x 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. 2009 1040x   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. 2009 1040x Standard mileage rate not allowed. 2009 1040x   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. 2009 1040x (See Rural mail carriers , earlier. 2009 1040x ) Note. 2009 1040x 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. 2009 1040x Five or more cars. 2009 1040x   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. 2009 1040x However, you may be able to deduct your actual expenses for operating each of the cars in your business. 2009 1040x See Actual Car Expenses , later, for information on how to figure your deduction. 2009 1040x   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. 2009 1040x   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. 2009 1040x Example 1. 2009 1040x Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. 2009 1040x 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. 2009 1040x Example 2. 2009 1040x Tony and his employees use his four pickup trucks in his landscaping business. 2009 1040x During the year, he traded in two of his old trucks for two newer ones. 2009 1040x Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. 2009 1040x Example 3. 2009 1040x Chris owns a repair shop and an insurance business. 2009 1040x He and his employees use his two pickup trucks and van for the repair shop. 2009 1040x Chris alternates using his two cars for the insurance business. 2009 1040x No one else uses the cars for business purposes. 2009 1040x 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. 2009 1040x Example 4. 2009 1040x Maureen owns a car and four vans that are used in her housecleaning business. 2009 1040x Her employees use the vans, and she uses the car to travel to various customers. 2009 1040x Maureen cannot use the standard mileage rate for the car or the vans. 2009 1040x This is because all five vehicles are used in Maureen's business at the same time. 2009 1040x She must use actual expenses for all vehicles. 2009 1040x Interest. 2009 1040x   If you are an employee, you cannot deduct any interest paid on a car loan. 2009 1040x This applies even if you use the car 100% for business as an employee. 2009 1040x   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. 2009 1040x For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). 2009 1040x You cannot deduct the part of the interest expense that represents your personal use of the car. 2009 1040x    If you use a home equity loan to purchase your car, you may be able to deduct the interest. 2009 1040x See Publication 936, Home Mortgage Interest Deduction, for more information. 2009 1040x Personal property taxes. 2009 1040x   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. 2009 1040x You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. 2009 1040x   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). 2009 1040x 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). 2009 1040x Parking fees and tolls. 2009 1040x   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. 2009 1040x (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. 2009 1040x ) Sale, trade-in, or other disposition. 2009 1040x   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. 2009 1040x See Disposition of a Car , later. 2009 1040x Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. 2009 1040x If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. 2009 1040x 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. 2009 1040x Continue to keep records, as explained later in chapter 5 . 2009 1040x Business and personal use. 2009 1040x   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. 2009 1040x You can divide your expense based on the miles driven for each purpose. 2009 1040x Example. 2009 1040x 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. 2009 1040x You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. 2009 1040x Employer-provided vehicle. 2009 1040x   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. 2009 1040x You cannot use the standard mileage rate. 2009 1040x See Vehicle Provided by Your Employer in chapter 6. 2009 1040x Interest on car loans. 2009 1040x   If you are an employee, you cannot deduct any interest paid on a car loan. 2009 1040x This interest is treated as personal interest and is not deductible. 2009 1040x If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. 2009 1040x Taxes paid on your car. 2009 1040x   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. 2009 1040x Enter the amount paid on line 7 of Schedule A (Form 1040). 2009 1040x Sales taxes. 2009 1040x   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. 2009 1040x Fines and collateral. 2009 1040x   You cannot deduct fines you pay or collateral you forfeit for traffic violations. 2009 1040x Casualty and theft losses. 2009 1040x   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. 2009 1040x See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. 2009 1040x Depreciation and section 179 deductions. 2009 1040x   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. 2009 1040x Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. 2009 1040x 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. 2009 1040x Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. 2009 1040x The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. 2009 1040x   Generally, there are limits on these deductions. 2009 1040x Special rules apply if you use your car 50% or less in your work or business. 2009 1040x   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. 2009 1040x   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. 2009 1040x Car defined. 2009 1040x   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. 2009 1040x Its unloaded gross vehicle weight must not be more than 6,000 pounds. 2009 1040x A car includes any part, component, or other item physically attached to it or usually included in the purchase price. 2009 1040x   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. 2009 1040x Qualified nonpersonal use vehicles. 2009 1040x   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. 2009 1040x 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. 2009 1040x Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. 2009 1040x More information. 2009 1040x   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. 2009 1040x 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. 2009 1040x 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. 2009 1040x 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. 2009 1040x See Depreciation Limits, later. 2009 1040x You can claim the section 179 deduction only in the year you place the car in service. 2009 1040x 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. 2009 1040x Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. 2009 1040x A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. 2009 1040x Example. 2009 1040x In 2012, you bought a new car and used it for personal purposes. 2009 1040x In 2013, you began to use it for business. 2009 1040x Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. 2009 1040x However, you can claim a depreciation deduction for the business use of the car starting in 2013. 2009 1040x See Depreciation Deduction , later. 2009 1040x More than 50% business use requirement. 2009 1040x   You must use the property more than 50% for business to claim any section 179 deduction. 2009 1040x If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. 2009 1040x The result is the cost of the property that can qualify for the section 179 deduction. 2009 1040x Example. 2009 1040x Peter purchased a car in April 2013 for $24,500 and used it 60% for business. 2009 1040x 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). 2009 1040x But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. 2009 1040x Limits. 2009 1040x   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. 2009 1040x Limit on the amount of the section 179 deduction. 2009 1040x   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. 2009 1040x   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. 2009 1040x 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. 2009 1040x   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. 2009 1040x   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. 2009 1040x   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. 2009 1040x You must allocate the dollar limit (after any reduction) between you. 2009 1040x   For more information on the above section 179 deduction limits, see Publication 946. 2009 1040x Limit for sport utility and certain other vehicles. 2009 1040x   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. 2009 1040x 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. 2009 1040x 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. 2009 1040x    Limit on total section 179, special depreciation allowance, and depreciation deduction. 2009 1040x   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. 2009 1040x The limit is reduced if your business use of the car is less than 100%. 2009 1040x See Depreciation Limits , later, for more information. 2009 1040x Example. 2009 1040x 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. 2009 1040x 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). 2009 1040x Cost of car. 2009 1040x   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. 2009 1040x 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. 2009 1040x Your cost includes only the cash you paid. 2009 1040x Basis of car for depreciation. 2009 1040x   The amount of the section 179 deduction reduces your basis in your car. 2009 1040x If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. 2009 1040x The resulting amount is the basis in your car you use to figure your depreciation deduction. 2009 1040x When to choose. 2009 1040x   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. 2009 1040x How to choose. 2009 1040x    Employees use Form 2106 to make this choice and report the section 179 deduction. 2009 1040x All others use Form 4562. 2009 1040x   File the appropriate form with either of the following. 2009 1040x Your original tax return filed for the year the property was placed in service (whether or not you file it timely). 2009 1040x An amended return filed within the time prescribed by law. 2009 1040x 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. 2009 1040x The amended return must also include any resulting adjustments to taxable income. 2009 1040x    You must keep records that show the specific identification of each piece of qualifying section 179 property. 2009 1040x These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. 2009 1040x Revoking an election. 2009 1040x   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. 2009 1040x Recapture of section 179 deduction. 2009 1040x   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. 2009 1040x 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. 2009 1040x Any section 179 deduction claimed on the car is included in calculating the excess depreciation. 2009 1040x For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. 2009 1040x Dispositions. 2009 1040x   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. 2009 1040x 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). 2009 1040x For information on the disposition of a car, see Disposition of a Car , later. 2009 1040x 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. 2009 1040x 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). 2009 1040x The special depreciation allowance applies only for the first year the car is placed in service. 2009 1040x 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). 2009 1040x Combined depreciation. 2009 1040x   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). 2009 1040x For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). 2009 1040x See Depreciation Limits , later in this chapter. 2009 1040x Qualified car. 2009 1040x   To be a qualified car (including trucks and vans), the car must meet all of the following tests. 2009 1040x 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. 2009 1040x Election not to claim the special depreciation allowance. 2009 1040x   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. 2009 1040x If you make this election, it applies to all 5-year property placed in service during the year. 2009 1040x   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. 2009 1040x    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. 2009 1040x 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. 2009 1040x This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. 2009 1040x You generally need to know the following things about the car you intend to depreciate. 2009 1040x Your basis in the car. 2009 1040x The date you place the car in service. 2009 1040x The method of depreciation and recovery period you will use. 2009 1040x Basis. 2009 1040x   Your basis in a car for figuring depreciation is generally its cost. 2009 1040x This includes any amount you borrow or pay in cash, other property, or services. 2009 1040x   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). 2009 1040x However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). 2009 1040x For one of these situations see Exception under Methods of depreciation, later. 2009 1040x   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. 2009 1040x Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . 2009 1040x Placed in service. 2009 1040x   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. 2009 1040x Depreciation begins when the car is placed in service for use in your work or business or for the production of income. 2009 1040x   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. 2009 1040x Car placed in service and disposed of in the same year. 2009 1040x   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. 2009 1040x Methods of depreciation. 2009 1040x   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). 2009 1040x MACRS is discussed later in this chapter. 2009 1040x Exception. 2009 1040x   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. 2009 1040x You must use straight line depreciation over the estimated remaining useful life of the car. 2009 1040x   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. 2009 1040x The rate per mile varies depending on the year(s) you used the standard mileage rate. 2009 1040x For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. 2009 1040x   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . 2009 1040x You must use your adjusted basis in your car to figure your depreciation deduction. 2009 1040x For additional information on the straight line method of depreciation, see Publication 946. 2009 1040x More-than-50%-use test. 2009 1040x   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. 2009 1040x You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. 2009 1040x   If your business use is 50% or less, you must use the straight line method to depreciate your car. 2009 1040x This is explained later under Car Used 50% or Less for Business . 2009 1040x Qualified business use. 2009 1040x   A qualified business use is any use in your trade or business. 2009 1040x It does not include use for the production of income (investment use). 2009 1040x However, you do combine your business and investment use to compute your depreciation deduction for the tax year. 2009 1040x Use of your car by another person. 2009 1040x   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. 2009 1040x It is directly connected with your business. 2009 1040x It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). 2009 1040x It results in a payment of fair market rent. 2009 1040x This includes any payment to you for the use of your car. 2009 1040x Business use changes. 2009 1040x   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. 2009 1040x See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. 2009 1040x    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. 2009 1040x Use for more than one purpose. 2009 1040x   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. 2009 1040x You do this on the basis of mileage. 2009 1040x 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. 2009 1040x Change from personal to business use. 2009 1040x   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. 2009 1040x In this case, you figure the percentage of business use for the year as follows. 2009 1040x Determine the percentage of business use for the period following the change. 2009 1040x Do this by dividing business miles by total miles driven during that period. 2009 1040x Multiply the percentage in (1) by a fraction. 2009 1040x The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. 2009 1040x Example. 2009 1040x You use a car only for personal purposes during the first 6 months of the year. 2009 1040x 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. 2009 1040x This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. 2009 1040x Your business use for the year is 40% (80% × 6/12). 2009 1040x Limits. 2009 1040x   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. 2009 1040x The maximum amount you can claim depends on the year in which you placed your car in service. 2009 1040x You have to reduce the maximum amount if you did not use the car exclusively for business. 2009 1040x See Depreciation Limits , later. 2009 1040x Unadjusted basis. 2009 1040x   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) . 2009 1040x Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. 2009 1040x   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. 2009 1040x Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. 2009 1040x Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. 2009 1040x 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. 2009 1040x 1, 2006), and alternative motor vehicle credit. 2009 1040x   See Form 8910 for information on the alternative motor vehicle credit. 2009 1040x If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. 2009 1040x See Car Used 50% or Less for Business, later, for more information. 2009 1040x If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. 2009 1040x Improvements. 2009 1040x   A major improvement to a car is treated as a new item of 5-year recovery property. 2009 1040x It is treated as placed in service in the year the improvement is made. 2009 1040x It does not matter how old the car is when the improvement is added. 2009 1040x Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. 2009 1040x However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. 2009 1040x 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. 2009 1040x See Depreciation Limits , later. 2009 1040x Car trade-in. 2009 1040x   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. 2009 1040x You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. 2009 1040x If you make this election, you treat the old car as disposed of at the time of the trade-in. 2009 1040x 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. 2009 1040x You then figure your depreciation deduction for the new car beginning with the date you placed it in service. 2009 1040x You make this election by completing Form 2106, Part II, Section D. 2009 1040x This method is explained later, beginning at Effect of trade-in on basis . 2009 1040x 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. 2009 1040x You must apply two depreciation limits (see Depreciation Limits , later). 2009 1040x 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. 2009 1040x 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. 2009 1040x You must use Form 4562 to compute your depreciation deduction. 2009 1040x You cannot use Form 2106, Part II, Section D. 2009 1040x This method is explained in Publication 946. 2009 1040x   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). 2009 1040x Otherwise, you must use the method described in (2). 2009 1040x Effect of trade-in on basis. 2009 1040x   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. 2009 1040x 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. 2009 1040x 168(i)-6(d)(3). 2009 1040x Traded car used only for business. 2009 1040x   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. 2009 1040x Example. 2009 1040x Paul trades in a car that has an adjusted basis of $5,000 for a new car. 2009 1040x In addition, he pays cash of $20,000 for the new car. 2009 1040x 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). 2009 1040x 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. 2009 1040x Traded car used partly in business. 2009 1040x   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. 2009 1040x 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. 2009 1040x (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. 2009 1040x See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. 2009 1040x )   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. 2009 1040x 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. 2009 1040x For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. 2009 1040x Modified Accelerated Cost Recovery System (MACRS). 2009 1040x   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. 2009 1040x   The maximum amount you can deduct is limited, depending on the year you placed your car in service. 2009 1040x See Depreciation Limits , later. 2009 1040x Recovery period. 2009 1040x   Under MACRS, cars are classified as 5-year property. 2009 1040x You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. 2009 1040x 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. 2009 1040x Depreciation deduction for certain Indian reservation property. 2009 1040x   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. 2009 1040x The recovery that applies for a business-use car is 3 years instead of 5 years. 2009 1040x However, the depreciation limits, discussed later, will still apply. 2009 1040x   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. 2009 1040x Depreciation methods. 2009 1040x   You can use one of the following methods to depreciate your car. 2009 1040x 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. 2009 1040x 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. 2009 1040x The straight line method (SL) over a 5-year recovery period. 2009 1040x    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. 2009 1040x This is because the chart has the switch to the straight line method built into its rates. 2009 1040x   Before choosing a method, you may wish to consider the following facts. 2009 1040x Using the straight line method provides equal yearly deductions throughout the recovery period. 2009 1040x Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. 2009 1040x MACRS depreciation chart. 2009 1040x   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . 2009 1040x Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. 2009 1040x A similar chart appears in the Instructions for Form 2106. 2009 1040x    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. 2009 1040x   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. 2009 1040x You file your return on a fiscal year basis. 2009 1040x You file your return for a short tax year (less than 12 months). 2009 1040x During the year, all of the following conditions apply. 2009 1040x You placed some property in service from January through September. 2009 1040x You placed some property in service from October through December. 2009 1040x 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. 2009 1040x   You placed qualified property in service on an Indian reservation. 2009 1040x Depreciation in future years. 2009 1040x   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. 2009 1040x However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. 2009 1040x 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. 2009 1040x See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. 2009 1040x    In future years, do not use the chart in this edition of the publication. 2009 1040x Instead, use the chart in the publication or the form instructions for those future years. 2009 1040x Disposition of car during recovery period. 2009 1040x   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. 2009 1040x 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. 2009 1040x How to use the 2013 chart. 2009 1040x   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. 2009 1040x Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. 2009 1040x If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. 2009 1040x    Your deduction cannot be more than the maximum depreciation limit for cars. 2009 1040x See Depreciation Limits, later. 2009 1040x Example. 2009 1040x Phil bought a used truck in February 2012 to use exclusively in his landscape business. 2009 1040x He paid $9,200 for the truck with no trade-in. 2009 1040x 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. 2009 1040x Phil used the MACRS depreciation chart in 2012 to find his percentage. 2009 1040x The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. 2009 1040x 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. 2009 1040x In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. 2009 1040x His records show that the business use of his truck was 90% in 2013. 2009 1040x Phil used Table 4-1 to find his percentage. 2009 1040x Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. 2009 1040x 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. 2009 1040x Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. 2009 1040x The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. 2009 1040x The maximum amount you can deduct each year depends on the year you place the car in service. 2009 1040x These limits are shown in the following tables. 2009 1040x   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. 2009 1040x 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. 2009 1040x 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. 2009 1040x 4$7,660 if you acquired the car before 5/6/2003. 2009 1040x $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. 2009 1040x 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. 2009 1040x Trucks and vans. 2009 1040x   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. 2009 1040x 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. 2009 1040x For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. 2009 1040x 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. 2009 1040x 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. 2009 1040x Car used less than full year. 2009 1040x   The depreciation limits are not reduced if you use a car for less than a full year. 2009 1040x 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. 2009 1040x However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. 2009 1040x See Reduction for personal use , next. 2009 1040x Reduction for personal use. 2009 1040x   The depreciation limits are reduced based on your percentage of personal use. 2009 1040x 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. 2009 1040x Section 179 deduction. 2009 1040x   The section 179 deduction is treated as a depreciation deduction. 2009 1040x 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. 2009 1040x Example. 2009 1040x On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. 2009 1040x He used it 80% for his business, and he chooses to take a section 179 deduction for the car. 2009 1040x The car is not qualified property for purposes of the special depreciation allowance. 2009 1040x Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. 2009 1040x This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). 2009 1040x Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). 2009 1040x He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. 2009 1040x Jack has reached his maximum depreciation deduction for 2013. 2009 1040x For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. 2009 1040x Deductions in years after the recovery period. 2009 1040x   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. 2009 1040x If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. 2009 1040x Unrecovered basis. 2009 1040x   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. 2009 1040x The recovery period. 2009 1040x   For 5-year property, your recovery period is 6 calendar years. 2009 1040x 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. 2009 1040x   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. 2009 1040x You determine your unrecovered basis in the 7th year after you placed the car in service. 2009 1040x How to treat unrecovered basis. 2009 1040x   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. 2009 1040x The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. 2009 1040x For example, no deduction is allowed for a year you use your car 100% for personal purposes. 2009 1040x Example. 2009 1040x In April 2007, Bob bought and placed in service a car he used exclusively in his business. 2009 1040x The car cost $31,500. 2009 1040x Bob did not claim a section 179 deduction or the special depreciation allowance for the car. 2009 1040x He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). 2009 1040x 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. 2009 1040x 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. 2009 1040x      MACRS     Deprec. 2009 1040x Year % Amount Limit Allowed 2007 20. 2009 1040x 00 $6,300 $3,060 $ 3,060 2008 32. 2009 1040x 00 10,080 4,900 4,900 2009 19. 2009 1040x 20 6,048 2,850 2,850 2010 11. 2009 1040x 52 3,629 1,775 1,775 2011 11. 2009 1040x 52 3,629 1,775 1,775 2012 5. 2009 1040x 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. 2009 1040x   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). 2009 1040x 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. 2009 1040x   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. 2009 1040x 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%. 2009 1040x 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. 2009 1040x Table 4-1. 2009 1040x 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. 2009 1040x ) 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. 2009 1040x   First, using the left column, find the date you first placed the car in service in 2013. 2009 1040x Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. 2009 1040x 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. 2009 1040x Refer back to the MACRS Depreciation Chart for the year you placed the car in service. 2009 1040x (See Car Used 50% or Less for Business . 2009 1040x )  Multiply the unadjusted basis of your car by your business use percentage. 2009 1040x Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. 2009 1040x (Also see Depreciation Limits . 2009 1040x )   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. 2009 1040x 1—Sept. 2009 1040x 30 percentage instead of the Oct. 2009 1040x 1—Dec. 2009 1040x 31 percentage for your car. 2009 1040x               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. 2009 1040x 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. 2009 1040x 1—Sept. 2009 1040x 30 for figuring depreciation for your car. 2009 1040x See Which Convention Applies? in chapter 4 of Publication 946 for more details. 2009 1040x               Example. 2009 1040x 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. 2009 1040x You