26 USC 280F - Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes

U.S Code last checked for updates: May 01, 2024

§ 280F.

Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes

(a)

Limitation on amount of depreciation for luxury automobiles

(1)

Depreciation

(A)

Limitation

The amount of the depreciation deduction for any taxable year for any passenger automobile shall not exceed—

(i)

$10,000 for the 1st taxable year in the recovery period,

(ii)

$16,000 for the 2nd taxable year in the recovery period,

(iii)

$9,600 for the 3rd taxable year in the recovery period, and

(iv)

$5,760 for each succeeding taxable year in the recovery period.

(B)

Disallowed deductions allowed for years after recovery period

(i)

In general

(ii)

$5,760 limitation

(iii)

Property must be depreciable

(iv)

Amount treated as depreciation deduction

(2)

Coordination with reductions in amount allowable by reason of personal use, etc.

This subsection shall be applied before—

(A)

the application of subsection (b), and

(B)

the application of any other reduction in the amount of any depreciation deduction allowable under section 168 by reason of any use not qualifying the property for such credit or depreciation deduction.

(b)

Limitation where business use of listed property not greater than 50 percent

(1)

Depreciation

(2)

Recapture

(A)

Where business use percentage does not exceed 50 percent

If—

(i)

property is predominantly used in a qualified business use in a taxable year in which it is placed in service, and

(ii)

such property is not predominantly used in a qualified business use for any subsequent taxable year,

then any excess depreciation shall be included in gross income for the taxable year referred to in clause (ii), and the depreciation deduction for the taxable year referred to in clause (ii) and any subsequent taxable years shall be determined under section 168(g) (relating to alternative depreciation system).

(B)

Excess depreciation

For purposes of subparagraph (A), the term “excess depreciation” means the excess (if any) of—

(i)

the amount of the depreciation deductions allowable with respect to the property for taxable years before the 1st taxable year in which the property was not predominantly used in a qualified business use, over

(ii)

the amount which would have been so allowable if the property had not been predominantly used in a qualified business use for the taxable year in which it was placed in service.

(3)

Property predominantly used in qualified business use

(c)

Treatment of leases

(1)

Lessor’s deductions not affected

(2)

Lessee’s deductions reduced

(3)

Allowable percentage

(4)

Lease term

(5)

Lessee recapture

(d)

Definitions and special rules

For purposes of this section—

(1)

Coordination with section 179

(2)

Subsequent depreciation deductions reduced for deductions allocable to personal use

(3)

Deductions of employee

(A)

In general

(B)

Employee use

(4)

Listed property

(A)

In general

Except as provided in subparagraph (B), the term “listed property” means—

(i)

any passenger automobile,

(ii)

any other property used as a means of transportation,

(iii)

any property of a type generally used for purposes of entertainment, recreation, or amusement, and

(iv)

any other property of a type specified by the Secretary by regulations.

(B)

Exception for property used in business of transporting persons or property

(5)

Passenger automobile

(A)

In general

Except as provided in subparagraph (B), the term “passenger automobile” means any 4-wheeled vehicle—

(i)

which is manufactured primarily for use on public streets, roads, and highways, and

(ii)

which is rated at 6,000 pounds unloaded gross vehicle weight or less.

In the case of a truck or van, clause (ii) shall be applied by substituting “gross vehicle weight” for “unloaded gross vehicle weight”.

(B)

Exception for certain vehicles

The term “passenger automobile” shall not include—

(i)

any ambulance, hearse, or combination ambulance-hearse used by the taxpayer directly in a trade or business,

(ii)

any vehicle used by the taxpayer directly in the trade or business of transporting persons or property for compensation or hire, and

(iii)

under regulations, any truck or van.

(6)

Business use percentage

(A)

In general

(B)

Qualified business use

(C)

Exception for certain use by 5-percent owners and related persons

(i)

In general

The term “qualified business use” shall not include—

(I)

leasing property to any 5-percent owner or related person,

(II)

use of property provided as compensation for the performance of services by a 5-percent owner or related person, or

(III)

use of property provided as compensation for the performance of services by any person not described in subclause (II) unless an amount is included in the gross income of such person with respect to such use, and, where required, there was withholding under chapter 24.

(ii)

Special rule for aircraft

(D)

Definitions

For purposes of this paragraph—

(i)

5-percent owner

(ii)

Related person

(7)

Automobile price inflation adjustment

(A)

In general

(B)

Automobile price inflation adjustment

For purposes of this paragraph—

(i)

In general

The automobile price inflation adjustment for any calendar year is the percentage (if any) by which—

(I)

the C-CPI-U automobile component for October of the preceding calendar year, exceeds

(II)

the automobile component of the CPI (as defined in section 1(f)(4)) for October of 2017, multiplied by the amount determined under 1(f)(3)(B).

(ii)

C-CPI-U automobile component

(8)

Unrecovered basis

(9)

All taxpayers holding interests in passenger automobile treated as 1 taxpayer

(10)

Special rule for property acquired in nonrecognition transactions

(e)

Regulations

(Added Pub. L. 98–369, div. A, title I, § 179(a), July 18, 1984, 98 Stat. 713; amended Pub. L. 99–44, § 4, May 24, 1985, 99 Stat. 78; Pub. L. 99–514, title II, § 201(d)(4), title XVIII, § 1812(e)(1)(A), (C), (2)–(5), Oct. 22, 1986, 100 Stat. 2139, 2836, 2837; Pub. L. 100–647, title I, §§ 1002(a)(10), (b)(2), 1018(u)(3), Nov. 10, 1988, 102 Stat. 3354, 3357, 3590; Pub. L. 101–239, title VII, § 7643(a), Dec. 19, 1989, 103 Stat. 2381; Pub. L. 101–508, title XI, § 11813(b)(13)(A)–(E), Nov. 5, 1990, 104 Stat. 1388–554, 1388–555; Pub. L. 104–188, title I, § 1702(h)(5), Aug. 20, 1996, 110 Stat. 1874; Pub. L. 105–34, title IX, § 971(a), Aug. 5, 1997, 111 Stat. 897; Pub. L. 105–206, title VI, § 6009(c), July 22, 1998, 112 Stat. 812; Pub. L. 107–147, title VI, § 602(b)(1), Mar. 9, 2002, 116 Stat. 59; Pub. L. 111–240, title II, § 2043(a), Sept. 27, 2010, 124 Stat. 2560; Pub. L. 113–295, div. A, title II, §§ 220(j), 221(a)(34)(E), Dec. 19, 2014, 128 Stat. 4036, 4042; Pub. L. 115–97, title I, §§ 11002(d)(8), 13202(a), (b), Dec. 22, 2017, 131 Stat. 2061, 2108, 2109.)

cite as: 26 USC 280F