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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
179, special depreciation allowance, and depreciation de-
duction, discussed later.
Limits. 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 prop-
erty.
Limit on the amount of the section 179 deduction.
For tax years beginning in 2023, the total amount you can
elect to deduct under section 179 can’t be more than
$1,160,000.
If the cost of your section 179 property placed in serv-
ice in tax years beginning in 2023 is over $2,890,000, you
must reduce the $1,160,000 dollar limit (but not below
zero) by the amount of cost over $2,890,000. If the cost of
your section 179 property placed in service during tax
years beginning in 2023 is $4,050,000 or more, you can’t
take a section 179 deduction.
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.
If you are married and file a joint return, you and your
spouse are treated as one taxpayer in determining any re-
duction to the dollar limit, regardless of which of you pur-
chased the property or placed it in service.
If you and your spouse file separate returns, you are
treated as one taxpayer for the dollar limit. You must allo-
cate the dollar limit (after any reduction) between you.
For more information on the above section 179 deduc-
tion limits, see Pub. 946, How To Depreciate Property.
Limit for sport utility and certain other vehicles.
You cannot elect to deduct more than $28,900 of the cost
of any heavy sport utility vehicle (SUV) and certain other
vehicles placed in service during the tax years beginning
in 2023. This rule applies to any four-wheeled vehicle pri-
marily designed or used to carry passengers over public
streets, roads, or highways that isn’t subject to any of the
passenger automobile limits explained under Depreciation
Limits, later, and that is rated at more than 6,000 pounds
gross vehicle weight and not more than 14,000 pounds
gross vehicle weight. However, the $28,900 limit doesn’t
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 isn’t readily
accessible directly from the passenger compartment;
or
•
That has an integral enclosure, fully enclosing the
driver compartment and load carrying device, doesn’t
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.
Limit on total section 179 deduction, special de-
preciation allowance, and depreciation deduction.
The first-year limit on the depreciation deduction, special
depreciation allowance, and section 179 deduction for ve-
hicles acquired before September 28, 2017, and placed in
service during 2023, is $12,200. The first-year limit on de-
preciation, special depreciation allowance, and section
179 deduction for vehicles acquired after September 27,
2017, and placed in service during 2023 increases to
$20,200. If you elect not to claim a special depreciation al-
lowance for a vehicle placed in service in 2023, the
amount increases to $12,200. The limit is reduced if your
business use of the vehicle is less than 100%. See Depre-
ciation Limits, later, for more information.
Example. In the earlier example under More than 50%
business use requirement, you had a car with a cost (for
purposes of the section 179 deduction) of $14,700. How-
ever, based on your business usage of the car, the total of
your section 179 deduction, special depreciation allow-
ance, and depreciation deductions is limited to $12,120
($20,200 limit x 60% (0.60) business use) because the car
was acquired after September 27, 2017, and placed in
service during 2023.
Cost of car. For purposes of the section 179 deduction,
the cost of the car doesn’t include any amount figured by
reference to any other property held by you at any time.
For example, if you buy a car as a replacement for a car
that was stolen or that was destroyed in a casualty loss,
and you use section 1033 to determine the basis in your
replacement vehicle, your cost for purposes of the section
179 deduction doesn’t include your adjusted basis in the
relinquished car. In that case, your cost includes only the
cash you paid.
Basis of car for depreciation. The amount of the
section 179 deduction reduces your basis in your car. If
you choose the section 179 deduction, you must subtract
the amount of the deduction from the cost of your car. The
resulting amount is the basis in your car you use to figure
your depreciation deduction.
When to elect. If you want to take the section 179 deduc-
tion, you must make the election in the tax year you place
the car in service for business or work.
How to elect. Employees use Form 2106, Employee
Business Expenses, to make the election and report the
section 179 deduction. All others use Form 4562, Depreci-
ation and Amortization, to make an election.
Form 2106 is only used by Armed Forces reserv-
ists, qualified performing artists, fee-basis state or
local government officials, and employees with
impairment-related work expenses. Due to the suspension
of miscellaneous itemized deductions subject to the 2%
floor under section 67(a), employees who do not fit into
one of the listed categories may not use Form 2106.
24 Chapter 4 Transportation Publication 463 (2023)