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Depreciation

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IRS Depreciation Deduction Limitations & Lease Inclusion Amounts - 2013

The IRS has issued the depreciation deduction limitations and lease inclusion amounts for vehicles purchased or leased in 2013. In general, there are two methods for computing vehicle expenses, the standard mileage rate (56.5 cents per mile for 2013; 55.5 cents per mile for 2012) or the actual expense method. If you use the standard mileage rate method you may not depreciate your car or deduct lease payments. If you use the actual cost method, you may take deductions for depreciation or lease payments, registration fees, licenses, gas, insurance, oil, repairs, garage rent, tolls, tires and parking fees.

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Proposed Regulations on Dispositions Under the Modified Accelerated Cost Recovery System

Although the IRS released final regulations that refine and simplify the rules for determining whether an expense may be deducted as a repair or must be capitalized, the Service chose not to finalize the regulations governing general asset accounts (GAAs) and the disposition of depreciable property under the Modified Accelerated Cost Recovery System (MACRS). Instead, proposed regulations were issued that make significant changes within this highly-controversial area.

Background

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Vehicle Depreciation and Deductions

In general, if you use your vehicle in pursuit of a trade or business, you are allowed to deduct the ordinary and necessary expenses incurred while operating the vehicle. However, any expenses associated with the personal use of the vehicle are not deductible. For purposes of these deductions, "car" includes a passenger vehicle, van, pickup or panel truck.

Personal vs. business miles. Business use of your car can include traveling from one work location to another work location within your tax home area; visiting customers; attending a business meeting away from the regular workplace; and traveling from home to a temporary workplace if you have one or more regular places of work. The costs of travel between home and a regular place of work, however, are nondeductible commuting expenses.

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