SUV’s and Depreciation
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SUV’s and Depreciation

SUV’s and Depreciation

In Revenue Procedure 2003-75, the IRS announced a separate set of luxury car depreciation limitations for trucks or vans that do not have a gross vehicle weight in excess of 6,000 pounds.

In that revenue procedure, the IRS stated that the term “trucks and vans” referred to passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles (SUVs). The same definition subsequently appeared in the instructions for Form 4562, Depreciation and Amortization. Based on this definition, the IRS seemed to imply that SUVs and vans built on a car chassis were not eligible for the exemption from the annual depreciation caps under the luxury car rules.

When the IRS issued Revenue Procedure 2008-22 with the 2008 depreciation limits for vehicles, the language indicating that an SUV should be considered to be a truck if it was built on a truck chassis was omitted. This change poses some uncertainty as to whether an SUV is or is not subject to the depreciation limits.

At this time, the IRS has no plans to provide a specific definition of a truck for purposes of the exemption from the depreciation limits for trucks and vans with a gross vehicle weight in excess of 6,000 pounds. The IRS did suggest basing the definition of a truck on Department of Transportation (DOT) guidelines.

Agencies of the DOT define a light truck that is designed for off-road operation, (i.e., has four-wheel drive, or is more than 6,000 pounds gross vehicle weight and has physical features consistent with those of a truck); or that is designed to perform at least one of the following functions: (1) transport more than 10 people; (2) provide temporary living quarters; (3) transport property in an open bed; (4) permit greater cargo-carrying capacity than passenger-carrying volume; or (5) can be converted to an open bed vehicle by removal of rear seats to form a flat continuous floor with the use of simple tools. Applying this definition, virtually every, if not all, heavy SUVs qualify as light trucks.

Given the absence of any specific IRS definition of a truck for purposes of Sec. 280, it appears reasonable to claim exemption from the depreciation limits if the manufacturer has or is entitled to categorize an SUV in excess of 6,000 gross vehicle weight as a light truck.