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").
Changing From Personal Use of Your Vehicle to Business Use
When converting personal-use property to business use, you must determine the depreciable basis of the property at the time of conversion.
The property's depreciable basis at the time of conversion is the lower of its fair market value or adjusted basis. The adjusted basis is the property's original cost plus any substantial improvements, such as replacing a vehicle's engine, minus any deductible casualty losses or diesel fuel tax credit claimed for the vehicle.
In most cases, the value of a vehicle will be lower than its adjusted basis, and therefore, the lower value will be the depreciable basis.
If you converted a vehicle to business use in 2021, the MACRS rate is applied to basis allocated to business travel. If you don't have mileage records for the entire year, you should base your business-use percentage on driving after the conversion date.
For example, if you started using your vehicle in April 2021 for business and drove 10,000 during the last nine months of the year, of which $8,000 were for business, the business percentage of 80% (8,000/10,000) would be multiplied by 9/12 resulting in a business-use percentage for the year of 60% (9/12 x 80%)
| 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.