In May the IRS released Rev. Proc. 2019-26; this spells out the depreciation level for luxury passenger autos ($50,000 or more) and the tax liability for leased vehicles.
- The annual depreciation limitations for passenger automobiles (including trucks and vans) first placed in service in calendar year 2019
- The lease inclusion amounts for automobiles first leased in 2019 (as well as amounts for trucks and vans first leased in 2019)
The tables in listed in Rev. Proc. 2019-26 provide the depreciation limits for automobiles placed in service during 2019:
- Table 1 provides the depreciation limits for automobiles acquired before September 28, 2017, and placed in service during 2019—thus reflecting the section 168(k) additional first year depreciation deduction.
- Table 2 provides the depreciation limits for automobiles acquired after September 27, 2017, and placed in service during 2019—thus reflecting the additional first year depreciation deduction.
- Table 3 provide the depreciation limit for automobiles placed in service during 2019 for which no additional first year depreciation deduction applies (that is, when the taxpayer does not use the automobile during 2019 more than 50% for business purposes, or elected out of the additional first year depreciation deduction, or acquired a used automobile that fails to satisfy the statutory rules).
- Table 4 applies to lessees of passenger automobiles, and shows income inclusion amounts for “a range of fair market values” for each tax year after the automobile is first leased.
Leasing a vehicle for use in your business will cost you in 2019.If a car that’s worth more than $50,000 is first leased for business during the year, the lessee must pay income tax each year on an amount as spelled out in IRS tables.
For example, on a three-year lease for a $70,000 car first put in service this year, you reduce the size of your tax deduction for the lease payments on the vehicle by $81 in 2019, $179 the next year and $265 in 2021.