Instructions For Form 2106 - Employee Business Expenses

Vehicle trade-in. If you traded

had been for business purposes) plus

Limit for sport utility and certain

one vehicle (the “old vehicle”) in on

any additional amount you pay for the

other vehicles. For sport utility and

another vehicle (the “new vehicle”) in

new vehicle. See Pub. 463 for more

certain other vehicles placed in

2010, there are two ways you can

information.

service in 2010, the portion of

treat the transaction.

vehicle’s cost taken into account in

If you converted the vehicle from

1. You can elect to treat the

figuring your section 179 deduction is

personal use to business use, your

transaction as a tax-free disposition

limited to $25,000. This rule applies

basis for depreciation is the smaller of

of the old vehicle and the purchase of

the vehicle’s adjusted basis or its fair

to any 4-wheeled vehicle primarily

the new vehicle. If you make this

market value on the date of

designed or used to carry passengers

election, you treat the old vehicle as

conversion.

over public streets, roads, or

disposed of at the time of the trade-in.

highways that is not subject to any of

The depreciable basis of the new

Line 31. Enter the amount of any

the passenger automobile limits

vehicle is the adjusted basis of the

section 179 deduction and, if

explained in the line 36 instructions

old vehicle (figured as if 100% of the

applicable, any special depreciation

vehicle’s use had been for business

and is rated at no more than 14,000

allowance claimed for this year.

purposes) plus any additional amount

pounds gross vehicle weight.

Section 179 deduction. If 2010

you paid for the new vehicle. You

However, the $25,000 limit does not

is the first year your vehicle was

then figure your depreciation

apply to any vehicle:

placed in service and the percentage

deduction for the new vehicle

•

Designed to have a seating

on line 14 is more than 50%, you can

beginning with the date you placed it

elect to deduct as an expense a

capacity of more than nine persons

in service. You make this election by

portion of the cost (subject to a yearly

behind the driver’s seat,

completing Form 2106, Part II,

limit). To calculate this section 179

Section D.

•

Equipped with a cargo area of at

deduction, multiply the part of the

2. If you do not make the election

least 6 feet in interior length that is an

cost of the vehicle that you choose to

described in (1), you must figure

open area or is designed for use as

expense by the percentage on line

depreciation separately for the

an open area but is enclosed by a

14. The total of your depreciation and

remaining basis of the old vehicle and

section 179 deduction generally

cap and is not readily accessible

for any additional amount you paid for

cannot be more than the percentage

directly from the passenger

the new vehicle. You must apply two

on line 14 multiplied by the applicable

compartment, or

depreciation limits. The limit that

limit explained in the line 36

applies to the remaining basis of the

•

That has an integral enclosure,

instructions (on page 8). Your section

old vehicle generally is the amount

fully enclosing the driver

179 deduction for the year cannot be

that would have been allowed had

compartment and load carrying

more than the income from your job

you not traded in the old vehicle. The

device, does not have seating

and any other active trade or

limit that applies to the additional

business on your Form 1040.

rearward of the driver’s seat, and has

amount you paid for the new vehicle

no body section protruding more than

generally is the limit that applies for

If you are claiming a section

30 inches ahead of the leading edge

the tax year it was placed in service,

179 deduction on other

reduced by the depreciation

of the windshield.

property, or you placed more

allowance for the remaining basis of

CAUTION

than $2,000,000 of section 179

the old vehicle. You must use Form

Special depreciation allowance.

property in service during the year,

4562 to compute your depreciation

You may be able to claim a special

use Form 4562 to figure your section

deduction. You cannot use Form

depreciation allowance for your new

179 deduction. Enter the amount of

2106, Part II, Section D.

the section 179 deduction allocable to

vehicle if:

your vehicle (from Form 4562, line

•

You purchased it after December

If you elect to use the method

12) on Form 2106, line 31.

described in (1), you must do so on a

31, 2007, and placed it in service

timely filed tax return (including

before January 1, 2011, and

Note. For section 179 purposes,

extensions). Otherwise, you must use

the cost of the new vehicle does not

•

The percentage on line 14 is more

the method described in (2).

include the adjusted basis of the

than 50%.

vehicle you traded in.

Line 30. Enter the vehicle’s actual

cost or other basis. Do not reduce

Example.

For a vehicle acquired before

your basis by any prior year’s

September 9, 2010, the special

depreciation. However, you must

Cost including taxes . . . . . . . .

$25,000

allowance is an additional first year

reduce your basis by any deductible

− 3,000

Adjusted basis of trade-in . . . .

depreciation deduction of 50% of the

casualty loss, deduction for clean-fuel

depreciable basis of your vehicle. For

vehicle, gas guzzler tax, alternative

Section 179 basis . . . . . . . . . .

$22,000

a vehicle acquired after September 8,

motor vehicle credit, or qualified

Limit on depreciation and

2010, the special allowance

plug-in electric vehicle credit you

section 179 deduction . . . . . . . $11,060*

claimed. Increase your basis by any

percentage is 100%. However, your

sales tax paid (unless you deducted

total section 179 deduction, special

Smaller of:

sales taxes in the year you purchased

depreciation allowance, and regular

Section 179 basis, or limit on

your vehicle) and any substantial

depreciation deduction cannot be

depreciation . . . . . . . . . . . . . .

$11,060

improvements to your vehicle.

more than $11,060 for cars and

× .75

Percentage on line 14 . . . . . . .

$11,160 for trucks and vans,

If you traded in your vehicle, your

multiplied by your business use

Section 179 deduction . . . . . .

$8,295

basis is the adjusted basis of the old

percentage on line 14. See the line

vehicle (reduced by depreciation

* $3,060 if electing out of special depreciation

36 instructions for depreciation limits.

figured as if 100% of the vehicle’s use

allowance or not qualified property.

-6-

Instructions For Form 2106 - Employee Business Expenses - 2010 Page 6

Related Articles

Related forms

Related Categories