26 Code of Federal Regulations 601.105

Amended by Revenue Procedure 2012-23

Effective date: immediately

The Internal Revenue Service allows a first-year bonus depreciation business deduction of $8,000 for automobiles acquired in 2012.

The first-year bonus depreciation deduction cannot be claimed if:

  • the automobile was purchased used;
  • the automobile is not used more than 50 percent for business purposes; or
  • the taxpayer elected out of the depreciation deduction.

The depreciation deduction limit for passenger vehicles purchased during 2012 is:

  • $11,160 for the first year (or $3,160 if the first-year bonus depreciation deduction does not apply);
  • $5,100 for the second year;
  • $3,050 for the third year; and
  • $1,875 for each succeeding year.

The depreciation deduction limit for vans or trucks acquired during 2012 is:

  • $11,360 for the first year (or $3,360 if the first-year bonus depreciation deduction does not apply);
  • $5,300 for the second year;
  • $3,150 for the third year; and
  • $1,875 for each succeeding year.

Passenger automobiles and trucks or vans with a lease term beginning in 2012 have a reduced deduction. To determine the deduction amount, the lessee must include in their gross income a pre-determined amount based on the fair market value of the vehicle. The inclusion amounts can be found in the notice.

Editor’s note — If you’re a broker or sales agent, chances are you may not have upgraded your vehicle during the past few years following the recession. This bonus deduction for purchasing a vehicle may be just the motivation to get you into new wheels and a peppier attitude.  The accounting for this bonus means the deduction is a subsidy which does not affect your regular five-year depreciation schedule.

Of course, this will most certainly increase vehicle sales, and that will increase jobs in the production and the sales of new vehicles. The ripple effect will boost purchasing in general, requisite for an increase in home sales volume.