Instructions For Form 2106 - Employee Business Expenses

line 7. Employees cannot deduct car

If you converted the vehicle from

use of the vehicle must have begun

loan interest.

personal use to business use, your

with you.

basis for depreciation is the smaller of

Line 24a. If during 2003 you rented

If you claim the 50% special

the vehicle’s adjusted basis or its fair

or leased instead of using your own

allowance on your new

market value on the date of

vehicle, enter the cost of renting.

vehicle, you cannot also claim

CAUTION

conversion.

Also, include on this line any

the 30% special allowance. However,

Line 31. Section 179 deduction. If

temporary rentals, such as when your

you can elect out of the 50% special

2003 is the first year your vehicle was

car was being repaired, except for

allowance and the vehicle would then

placed in service and the percentage

amounts included on line 3.

be eligible for the 30% special

on line 14 is more than 50%, you may

allowance. In addition, you can elect

Line 24b. If you leased a vehicle for

elect to deduct as an expense a

out of both the 50% and 30% special

a term of 30 days or more after June

portion of the cost (subject to a yearly

allowances. For more details, see

18, 1984, you may have to reduce

limit). To calculate this section 179

below.

your deduction for vehicle lease

deduction, multiply the part of the

payments by an amount called the

50% special allowance. To

cost of the vehicle that you choose to

inclusion amount. You may have an

qualify for the 50% special allowance,

expense by the percentage on line

inclusion amount if:

your new vehicle must have been

14. The total of your depreciation and

acquired and placed in service after

And the vehicle’s

section 179 deduction generally

May 5, 2003. If a written contract to

fair market value

cannot be more than the percentage

acquire the vehicle existed before

on the first day

on line 14 multiplied by the applicable

May 6, 2003, the vehicle does not

The lease term

of the lease

limit explained in the line 36

qualify. To figure the amount of the

began in:

exceeded:

instructions (see pages 7 and 8).

50% special allowance, complete the

Your section 179 deduction for the

worksheet on page 6.

2003 . . . . . . . . . . . . . . . . . . . . $ 18,000

year cannot be more than the income

from your job and any other active

30% special allowance. To

1999 through 2002 . . . . . . . . . .

15,500

trade or business on your Form 1040.

qualify for the 30% special allowance,

1997 or 1998 . . . . . . . . . . . . . .

15,800

your new vehicle must have been

If you are claiming a section

acquired and placed in service before

1995 or 1996 . . . . . . . . . . . . . .

15,500

179 deduction on other

May 6, 2003, or you have elected to

If the lease term began before 1995, see

property, or you placed more

CAUTION

claim the 30% special allowance for

Pub. 463 to find out if you have an

than $400,000 of section 179

vehicles that would otherwise qualify

inclusion amount.

property in service during the year,

for the 50% special allowance. You

use Form 4562 to figure your section

may also be able to claim the 30%

179 deduction. Enter the amount of

See Pub. 463 to figure the

special allowance on a used vehicle

the section 179 deduction allocable to

inclusion amount.

that is first used in the active conduct

your vehicle (from Form 4562, line

Line 25. If during 2003 your

of your trade or business in the

12) on Form 2106, line 31.

employer provided a vehicle for your

Liberty Zone, but only if substantially

business use and included 100% of

all of your use of the vehicle was

Note: For section 179 purposes,

its annual lease value in box 1 of your

within that zone (for details, see Pub.

the cost of the new vehicle does not

Form W-2, enter this amount on line

946). To figure the amount of the

include the adjusted basis of the

25. If less than 100% of the annual

vehicle you traded in.

30% special allowance, complete the

lease value was included in box 1 of

worksheet on page 6.

your Form W-2, skip line 25.

Example:

Election out. You may elect not

to claim the special allowance for

Cost including taxes . . . . . . .

$15,000

Section D—Depreciation of

vehicles acquired and placed in

−

Vehicles

Adjusted basis of trade-in . . .

2,000

service in 2003 by attaching a

Depreciation is an amount you can

statement to your tax return indicating

Section 179 basis . . . . . . . . . = $13,000

deduct to recover the cost or other

that you are electing not to claim the

Limit on depreciation and

basis of your vehicle over a certain

50% or 30% special allowance for

section 179 deduction . . . . . .

$10,710

number of years. In some cases, you

any such vehicles. If you make this

may elect to expense, under section

election, you may have a

Smaller of:

179, part of the cost of your vehicle in

“depreciation adjustment” on these

Section 179 basis, or limit on

the year of purchase. For details, see

vehicles for the alternative minimum

depreciation and section 179

Pub. 463.

tax. The election must be made on a

deduction . . . . . . . . . . . . . .

$10,710

timely-filed original return (including

Line 30. Enter the vehicle’s actual

× .75

extensions) or on an amended return

Percentage on line 14 . . . . . .

cost (including sales tax) or other

filed within 6 months of the due date

basis (unadjusted for prior years’

Section 179 deduction . . . . .

= $8,033

of the return (excluding extensions). If

depreciation). If you traded in your

you file an amended return, write

vehicle, your basis is the adjusted

Special depreciation allowance. If

“Filed pursuant to section

basis of the old vehicle (figured as if

you acquired and placed in service a

301.9100-2” at the top of that return.

100% of the vehicle’s use had been

new vehicle during the year, and the

for business purposes) plus any

percentage on line 14 is more than

Election to claim 30% instead of

additional amount you pay for your

50%, you may be able to claim either

50% special allowance. You may

new vehicle. Reduce your basis by

an additional 50% or 30% special

elect to claim the 30% special

any diesel fuel or qualified electric

depreciation allowance (subject to the

allowance instead of the 50% special

vehicle credit or deduction for

overall limit explained above). To

allowance for vehicles acquired and

clean-fuel vehicles you claimed.

qualify as a new vehicle, the original

placed in service after May 5, 2003,

-5-

Instructions For Form 2106 - Employee Business Expenses - 2003 Page 5

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