Per Diem Rates from the U.S. General Services Administration

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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").

Per Diem Rates

Personal Property Tax Included in Vehicle Registration Fee

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If you're self-employed and use the standard mileage rate to deduct the business use of your vehicle, you may also claim a separate deduction for tolls, parking fees and personal property taxes included as part of the vehicle's registration fee.

Keep in mind, since these items are deducted in addition to the mileage deduction, they serve to reduce your self-employment tax.

Generally, most states base a vehicle's registration fee on the vehicle's weight, model, year, or horsepower and not its value. However, there are states (listed below) that base part of their registration fee on a vehicle's value.

When any part of the registration fee is based on the vehicle's value, it is considered a personal property tax. Even for those who don't have a business, if they itemize their deductions they may deduct personal property taxes on Schedule A.

States That Assess a Personal Property Tax On Vehicles

1. AL
2. AZ
3. AR
4. CA
5. CO
6. GA
7. IN
8. IO
9. KY
10. LA
11. MI
12. MN
13. MS
14. MO
15. MT
16. NE
17. NV
18. NH
19. SC
20. WA
21. WY

Deducting Personal Property Tax

You can deduct the business-related portion of the personanl property tax on Schedule C. It is added to your mileage deduction if you use the standard mileage rate.

If you itemize your deductions and use your vehicle less than 100% for business, you may only deduct the business-related portion of the tax; the nonbusiness portion of the tax may be deducted on Schedule A under tax section.

Example:

• You're self-employed
• You use the standard mileage rate to deduct your business-related mileage.
• Your vehicle's total registration fee is $250.
• $200 of the fee is a personal property tax.
• The remaining portion of the fee, $50, is not based on value.
• You itemize your deductions.
• You use your vehicle 80% for business during the year and 20% for personal use.
• You are a Schedule C filer.

Result:

• Deduct $160 (80% x $200) on Schedule C .
• Deduct $40 (20% x $200) on Schedule A (the personal use portion of the fee that is based on the vehicle's value).
• Since the remaining $50 of the fee is not based on value, it is not deductible (it is a nondeductible personal expense).

TABLE 1 Depreciation Limitations for Passenger Automobiles Acquired After 9/27/2017 and Placed in Service During Calendar Year 2021 First-Year Bonus Depreciation Included
1st Tax Year	$18,200
2nd Tax Year	$16,400
3rd Tax Year	$9,800
Each Succeeding Year	$5,860

TABLE 2 Depreciation Limitations for Passenger Automobiles Placed in Service During Calendar Year 2021. First-year Bonus Depreciation Not Included
1st Tax Year	$10,200
2nd Tax Year	$16,400
3rd Tax Year	$9,800
Each Succeeding Year	$5,860

Heavy SUVs, Trucks, and Vans

SUVs, trucks, and vans weight-rated by the manufacturer at more than 6,000 pounds gross vehicle weight are not subject to annual depreciation ceilings. However, first-year expensing (also referred to as the Section 179 deduction) may be limited to $26,200 rather than the general expensing limit, which is $1,050,000 for 2021.

Note that he $26,200 first-year expensing limit applies to any four-wheeled vehicle primarily designed or which can be used to carry passengers over public thoroughfares and is weight-rated at more than 6,000 pounds but not more than 14,000 pounds gross vehicle weight.

Keep in mind, to qualify for first-year expensing, the vehicle must be used more than 50% for business. If first-year expensing is not or cannot be elected, a full depreciation deduction using the MACRS rate is allowed with no dollar limit.

The $26,200 Expensing Limit Does Not Apply to the Following:

• Vehicles with seating for more than nine passengers behind the driver
• Pickup trucks with an interior cargo bed at least six feet long that is an open area or is enclosed by a cap and not readily accessible to passengers.
• Cargo vans without rear seating and with no body sections protruding more than 30 inches ahead of the windshield.

TIP: How to avoid the $26,200 limit

If your vehicle qualifies for both bonus depreciation (section 168) and first-year expensing (section 179 deduction), you may choose not to use first-year expensing and use only bonus depreciation. By using only bonus depreciation you can avoid the $26,200 limit that applies to first-year expensing!

Lease payments:

You May Have to Reduce Your Deduction

If you lease a vehicle, you may deduct your lease payments as a business expense. If you use the vehicle for business and personal purposes, only lease payments related to business use are deductible. Lease payments related to personal use of the vehicle are nondeductible personal expenses.

If in 2021 you lease a vehicle for a lease term of 30 days or more, you may have to indirectly include what's called an "inclusion" amount in your income for each year you lease a vehicle. This done indirectly because you don't actually add this amount to your income, instead, you reduce your lease payment deduction by the inclusion amount (See IRS Publication 463 to determine the inclusion amount for various tax years).

This "inclusion" rule applies if you use the actual expense method for claiming your vehicle deduction and not if you use the standard mileage rate.

For vehicles first leased in 2021, there's no inclusion amount if the fair market value of the vehicle at the start of the lease is $51,000 or less.