IRS releases 2020 limits for depreciation deductions for autos
On July 9, 2020, the IRS released Revenue Procedure 2020-37, providing rules for depreciating passenger automobiles.
Rev. Proc. 2020-37 provides two major updates: (1) limitations on depreciation deductions for owners of passenger automobiles placed in service in calendar year 2020, and (2) amounts that must be included in income by lessees of passenger automobiles first leased in calendar year 2020.
Section 280F(a) limits depreciation deductions for the year taxpayers place passenger automobiles in service, as well as succeeding years. Section 280F(d)(7) requires the IRS to adjust the depreciation limits to reflect inflation with reference to the Department of Labor’s Chained Consumer Price Index for all Urban Consumers.
Accordingly, the new revenue procedure contains three tables. Tables 1 and 2 list the permitted yearly depreciation deductions updated for 2020, which vary depending on whether bonus depreciation applies. Table 3 describes the inclusions in gross income required by Reg. section 1.280F-7(a).
All taxpayers placing passenger automobiles in service in 2020 must use the limits in the tables below. Please see our Tax Alert on the Rev. Proc. 2019-13 safe harbor method for bonus depreciation on passenger automobiles for more detail on classifying property and using the depreciation limits.
Table 1: depreciation limits for passenger automobiles acquired after Sept. 27, 2017 and placed in service during calendar year 2020 for which bonus depreciation applies
| Tax Year | Amount |
| 1st Tax Year | $18,100 |
| 2nd Tax Year | $16,100 |
| 3rd Tax Year | $9,700 |
| Each Succeeding Year | $5,760 |
Table 2: depreciation limits for passenger automobiles placed in service during calendar year 2020 for which bonus depreciation does not apply
| Tax Year | Amount |
| 1st Tax Year | $10,100 |
| 2nd Tax Year | $16,100 |
| 3rd Tax Year | $9,700 |
| Each Succeeding Year | $5,760 |
Table 3: income inclusions for passenger automobiles with a lease term beginning in calendar year 2020
| Fair Market Value of Passenger Automobile | Tax Year During Lease | |||||
| Over | Not Over | 1st | 2nd | 3rd | 4th | 5th & later |
| $50,000 | $51,000 | 0 | 1 | 0 | 2 | 2 |
| 51,000 | 52,000 | 2 | 6 | 9 | 10 | 13 |
| 52,000 | 53,000 | 5 | 11 | 17 | 20 | 24 |
| 53,000 | 54,000 | 7 | 17 | 24 | 30 | 35 |
| 54,000 | 55,000 | 10 | 22 | 32 | 39 | 46 |
| 55,000 | 56,000 | 12 | 27 | 41 | 48 | 57 |
| 56,000 | 57,000 | 15 | 32 | 49 | 58 | 68 |
| 57,000 | 58,000 | 17 | 38 | 56 | 68 | 79 |
| 58,000 | 59,000 | 19 | 44 | 64 | 77 | 90 |
| 59,000 | 60,000 | 22 | 49 | 72 | 87 | 100 |
| 60,000 | 62,000 | 26 | 56 | 84 | 102 | 117 |
| 62,000 | 64,000 | 30 | 68 | 99 | 121 | 139 |
| 64,000 | 66,000 | 35 | 78 | 116 | 139 | 161 |
| 66,000 | 68,000 | 40 | 89 | 131 | 159 | 183 |
| 68,000 | 70,000 | 45 | 99 | 148 | 177 | 205 |
| 70,000 | 72,000 | 50 | 110 | 163 | 197 | 227 |
| 72,000 | 74,000 | 55 | 121 | 179 | 215 | 249 |
| 74,000 | 76,000 | 60 | 131 | 195 | 235 | 271 |
| 76,000 | 78,000 | 64 | 142 | 211 | 254 | 293 |
| 78,000 | 80,000 | 69 | 153 | 227 | 272 | 315 |
| 80,000 | 85,000 | 78 | 172 | 254 | 306 | 353 |
| 85,000 | 90,000 | 90 | 198 | 295 | 353 | 408 |
| 90,000 | 95,000 | 102 | 225 | 334 | 401 | 463 |
| 95,000 | 100,000 | 114 | 252 | 373 | 449 | 518 |
| 100,000 | 110,000 | 133 | 292 | 433 | 520 | 600 |
| 110,000 | 120,000 | 157 | 345 | 513 | 615 | 710 |
| 120,000 | 130,000 | 181 | 399 | 592 | 710 | 820 |
| 130,000 | 140,000 | 206 | 452 | 671 | 805 | 931 |
| 140,000 | 150,000 | 230 | 506 | 750 | 901 | 1,040 |
| 150,000 | 160,000 | 254 | 559 | 830 | 996 | 1,150 |
| 160,000 | 170,000 | 279 | 612 | 909 | 1,091 | 1,260 |
| 170,000 | 180,000 | 303 | 666 | 988 | 1,186 | 1,370 |
| 180,000 | 190,000 | 327 | 720 | 1,067 | 1,281 | 1,480 |
| 190,000 | 200,000 | 351 | 773 | 1,147 | 1,377 | 1,589 |
| 200,000 | 210,000 | 376 | 826 | 1,227 | 1,471 | 1,700 |
| 210,000 | 220,000 | 400 | 880 | 1,306 | 1,566 | 1,810 |
| 220,000 | 230,000 | 424 | 934 | 1,385 | 1,661 | 1,920 |