IRS Announces 2022 Automobile Depreciation Limitations

For owners of passenger automobiles, IRC §280F(a) places a limitation on the allowable depreciation deduction in the year the automobile is placed in service, as well as the subsequent years. IRC §280F(d)(7) requires the IRS to adjust the dollar limitations annually for inflation.

To that end, the IRS recently released Rev. Proc. 2022-17, which outlines the inflation-adjusted annual depreciation limitations and lease inclusion amounts for passenger automobiles placed in service in 2022. It’s important to remember that these depreciation caps and lease inclusion amounts do not apply to automobiles with a gross vehicle weight rating (GVWR) of more than 6,000 pounds. 

The updated annual depreciation limitations and lease inclusion amounts are listed below:

Table 1: Passenger Automobiles Acquired After September 27, 2017, and Placed in Service During Calendar Year 2022, for which § 168(k) “Bonus Depreciation” Applies

Tax Year Depreciation Amount Allowed
1st Tax Year $19,200 (increased from $18,200)
2nd Tax Year $18,000 (increased from $16,400)
3rd Tax Year $10,800 (increased from $9,800)
Each Succeeding Year $6,460 (increased from $5,860)

Table 2: Passenger Automobiles Acquired After September 27, 2017, and Placed in Service During Calendar Year 2022, for which § 168(k) “Bonus Depreciation” Does Not Apply

Tax Year Depreciation Amount Allowed
1st Tax Year $11,200 (increased from $10,200)
2nd Tax Year $18,000 (increased from $16,400)
3rd Tax Year $10,800 (increased from $9,800)
4th Tax Year $6,460 (increased from $5,860)

Lessees of passenger automobiles are also subject to deduction limitations under IRC §280F(c)(2). If an automobile is first leased in 2022, a taxpayer must add a lease inclusion amount to gross income in each year of the lease if its fair market value at the time of lease is greater than $56,000. The lease inclusion table is below: 

Table 3: Dollar Amounts for Passenger Automobiles with a Lease Term Beginning in Calendar Year 2022

Fair Market Value 

Tax Year During Lease 
Over              Not Over         1st 2nd 3rd 4th 5th and over 
$56,000 $57,000 1 1 1 2 2
$57,000 $58,000 2 4 5 7 7
$58,000 $59,000 3 7 9 11 13
$59,000 $60,000 4 9 14 16 19
$60,000 $62,000 6 13 20 23 28
$62,000 $64,000 9 19 27 34 38
$64,000 $66,000 11 24 36 43 50
$66,000 $68,000 14 30 43 53 61
$68,000 $70,000 16 35 52 63 72
$70,000 $72,000 19 40 61 72 83
$72,000 $74,000 21 46 68 82 95
$74,000 $76,000 24 51 77 91 106
$76,000 $78,000 26 57 85 101 117
$78,000 $80,000 29 62 93 111 128
$80,000 $85,000 33 72 107 128 148
$85,000 $90,000 39 86 127 152 176
$90,000 $95,000 45 100 147 177 204
$95,000 $100,000 52 113 167 201 233
$100,000 $110,000 61 133 198 238 274
$110,000 $120,000 73 161 239 286 330
$120,000 $130,000 86 188 279 335 387
$130,000 $140,000 98 216 319 384 443
$140,000 $150,000 111 243 360 432 499
$150,000 $160,000 123 270 401 481 555
$160,000 $170,000 135 298 441 529 612
$170,000 $180,000 148 325 482 578 667
$180,000 $190,000 160 352 523 626 724
$190,000 $200,000 173 379 563 676 779
$200,000 $210,000 185 407 603 724 836
$210,000 $220,000 198 434 644 773 892
$220,000 $230,000 210 461 685 821 949
$230,000 $240,000 222 489 725 870 1,005
$240,000 and over 235 516 766 918 1,061

Contact your Schneider Downs tax advisor if you need assistance or would like to discuss how these depreciation and deduction limitations could impact your business.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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