rp-18-25.pdf

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26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement;
determination of correct tax liability.
(Also Part I, §§ 280F; 1.280F-7.)

Rev. Proc. 2018-25

SECTION 1. PURPOSE
This revenue procedure provides: (1) tables of limitations on depreciation
deductions for owners of passenger automobiles first placed in service by the taxpayer
during calendar year 2018; and (2) a table of amounts that must be included in income
by lessees of passenger automobiles first leased by the taxpayer during calendar year
2018. For purposes of this revenue procedure, the term “passenger automobiles”
includes trucks and vans.
SECTION 2. BACKGROUND
.01 For owners of passenger automobiles, § 280F(a), as modified by § 13202(a)(1)
of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent
resolution on the budget for fiscal year 2018”, Pub. L. No. 115-97 (Dec. 22, 2017) (the
“Act”), imposes dollar limitations on the depreciation deduction for the year the taxpayer
places the passenger automobile in service and for each succeeding year. The dollar
limitation amounts in this revenue procedure reflect the new limits provided in
§ 13202(a)(1) of the Act and are applicable to passenger automobiles placed in service

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during calendar year 2018.
.02 Section 13201 of the Act amended § 168(k) to extend and modify the additional
first year depreciation deduction for qualified property acquired and placed in service
after September 27, 2017, and before January 1, 2027. Section 168(k)(1) provides that,
in the case of qualified property, the depreciation deduction allowed under § 167(a) for
the taxable year in which the property is placed in service includes an allowance equal
to the applicable percentage of the property’s adjusted basis (hereinafter, referred to as
“§ 168(k) additional first year depreciation deduction”). Pursuant to § 168(k)(6)(A), the
applicable percentage is 100 percent for qualified property acquired and placed in
service after September 27, 2017, and placed in service before January 1, 2023, and is
phased down 20 percent each year for property placed in service through December 31,
2026. However, if a taxpayer elects to apply § 168(k)(10) in the case of qualified
property placed in service by the taxpayer during the first taxable year ending after
September 27, 2017, the depreciation deduction allowed under § 167(a) for the taxable
year includes an allowance equal to 50 percent of the property’s adjusted basis.
Pursuant to § 168(k)(8)(B)(i), the applicable percentage is 40 percent for qualified
property acquired before September 28, 2017, and placed in service in 2018. For
qualified property acquired and placed in service after September 27, 2017,
§ 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i)
by $8,000. For qualified property acquired by the taxpayer before September 28, 2017,
and placed in service by the taxpayer during 2018, § 168(k)(2)(F)(iii) increases the first
year depreciation allowed under § 280F(a)(1)(A)(i) by $6,400.
.03 Tables 1 through 3 of this revenue procedure provide depreciation limitations for

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passenger automobiles placed in service during calendar year 2018. Table 1 provides
depreciation limitations for passenger automobiles acquired by the taxpayer before
September 28, 2017, and placed in service by the taxpayer during calendar year 2018,
for which the § 168(k) additional first year depreciation deduction applies. Table 2
provides depreciation limitations for passenger automobiles acquired by the taxpayer
after September 27, 2017, and placed in service by the taxpayer during calendar year
2018, for which the § 168(k) additional first year depreciation deduction applies. Table
3 provides depreciation limitations for passenger automobiles placed in service during
calendar year 2018 for which no § 168(k) additional first year depreciation deduction
applies. The § 168(k) additional first year depreciation deduction does not apply for
2018 if the taxpayer: (1) did not use the passenger automobile during 2018 more than
50 percent for business purposes; (2) elected out of the § 168(k) additional first year
depreciation deduction pursuant to § 168(k)(7) for the class of property that includes
passenger automobiles; or (3) acquired the passenger automobile used and the
acquisition of such property did not meet the acquisition requirements in
§ 168(k)(2)(E)(ii).
.04 Section 280F(c)(2) requires a reduction to the amount of deduction allowed to
the lessee of a leased passenger automobile. Pursuant to § 280F(c)(3), the reduction
must be substantially equivalent to the limitations on the depreciation deductions
imposed on owners of passenger automobiles. Under § 1.280F-7(a) of the Income Tax
Regulations, this reduction requires a lessee to include in gross income an amount
determined by applying a formula to the amount obtained from a table. Table 4 applies
to lessees of passenger automobiles. This table shows income inclusion amounts for a

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range of fair market values for each taxable year after the passenger automobile is first
leased.
SECTION 3. SCOPE
.01 The limitations on depreciation deductions in section 4.01(2) of this revenue
procedure apply to passenger automobiles, other than leased passenger automobiles,
that are placed in service by the taxpayer in calendar year 2018, and continue to apply
for each taxable year that the passenger automobile remains in service.
.02 The table in section 4.02 of this revenue procedure applies to leased passenger
automobiles for which the lease term begins during calendar year 2018. Lessees of
these passenger automobiles must use these tables to determine the inclusion amount
for each taxable year during which the passenger automobile is leased. See Rev. Proc.
2013-21, 2013-12 I.R.B. 660, for passenger automobiles first leased during calendar
year 2013; Rev. Proc. 2014-21, 2014-11 I.R.B. 641, as amplified and modified by
section 4.03 of Rev. Proc. 2015-19, 2015-8 I.R.B. 656, for passenger automobiles first
leased during calendar year 2014; Rev. Proc. 2015-19, as amplified and modified by
section 4.03 of Rev. Proc. 2016-23, 2016-16 I.R.B. 581, for passenger automobiles first
leased during calendar year 2015, Rev. Proc. 2016-23 for passenger automobiles first
leased during calendar year 2016, and Rev. Proc. 2017-29, 2017-14 I.R.B. 1065, for
passenger automobiles first leased during calendar year 2017.
SECTION 4. APPLICATION
.01 Limitations on Depreciation Deductions for Certain Automobiles.
(1) Amount of the inflation adjustment. Section 280F(a), as amended by
§ 13202(a)(1) of the Act, provides the limitation on depreciation for passenger

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automobiles placed in service during calendar year 2018. Accordingly, no adjustment
for inflation applies to calendar year 2018. See § 280F(d)(7)(A), as amended by
§ 13202(a)(2)(B) of the Act.
(2) Amount of the limitation. Tables 1 through 3 contain the dollar amount of the
depreciation limitation for each taxable year for passenger automobiles a taxpayer
places in service during calendar year 2018. Use Table 1 for a passenger automobile
to which the § 168(k) additional first year depreciation deduction applies that is acquired
before September 28, 2017, and placed in service during calendar year 2018; Table 2
for a passenger automobile to which the § 168(k) additional first year depreciation
deduction applies that is acquired after September 27, 2017, and placed in service
during calendar year 2018; and Table 3 for a passenger automobile for which no
§ 168(k) additional first year depreciation deduction applies.
REV. PROC. 2018-** TABLE 1

DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES
ACQUIRED BEFORE SEPTEMBER 28, 2017, AND PLACED IN SERVICE DURING
CALENDAR YEAR 2018 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR
DEPRECIATION DEDUCTION APPLIES

Tax Year Amount
1st Tax Year $ 16,400
2nd Tax Year $ 16,000
3rd Tax Year $ 9,600
Each Succeeding Year $ 5,760

REV. PROC. 2018-** TABLE 2

DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES ACQUIRED
AFTER SEPTEMBER 27, 2017, AND PLACED IN SERVICE DURING CALENDAR
YEAR 2018, FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION
DEDUCTION APPLIES

Tax Year Amount
1st Tax Year $ 18,000
2nd Tax Year $ 16,000

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3rd Tax Year $ 9,600
Each Succeeding Year $ 5,760

REV. PROC. 2018-** TABLE 3

DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES
PLACED IN SERVICE DURING CALENDAR YEAR 2018 FOR WHICH NO § 168(k)
ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES

Tax Year Amount
1st Tax Year $ 10,000
2nd Tax Year $ 16,000
3rd Tax Year $ 9,600
Each Succeeding Year $ 5,760

.02 Inclusions in Income of Lessees of Passenger Automobiles.
A taxpayer must follow the procedures in § 1.280F-7(a) for determining the
income inclusion amounts for passenger automobiles first leased in calendar year 2018.
In applying these procedures, lessees of passenger automobiles should use Table 4 of
this revenue procedure.

REV. PROC. 2018-** TABLE 4

DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES

WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2018

Fair Market Value of
Passenger Automobile

Tax Year During Lease

Over

Not Over

1
st

2
nd

3
rd

4
th

5
th
& later

$50,000 $51,000 1 3 5 5 6
51,000 52,000 4 9 13 16 19
52,000 53,000 7 15 22 27 31
53,000 54,000 10 21 31 37 44
54,000 55,000 12 27 40 48 56
55,000 56,000 15 33 49 59 68
56,000 57,000 18 39 58 69 81
57,000 58,000 20 45 67 80 93
58,000 59,000 23 51 76 91 105
59,000 60,000 26 57 85 101 117
60,000 62,000 30 66 98 118 135

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REV. PROC. 2018-** TABLE 4

DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES

WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2018

Fair Market Value of
Passenger Automobile

Tax Year During Lease

Over

Not Over

1
st

2
nd

3
rd

4
th

5
th
& later

62,000 64,000 36 78 116 139 160
64,000 66,000 41 90 134 160 185
66,000 68,000 46 102 152 181 210
68,000 70,000 52 114 169 203 235
70,000 72,000 57 126 187 225 259
72,000 74,000 63 138 205 246 284
74,000 76,000 68 150 223 267 309
76,000 78,000 74 162 241 288 333
78,000 80,000 79 174 259 310 357
80,000 85,000 89 195 290 347 401
85,000 90,000 102 225 335 400 463
90,000 95,000 116 255 379 454 525
95,000 100,000 130 285 423 508 586
100,000 110,000 150 330 491 587 679
110,000 120,000 178 390 579 695 802
120,000 130,000 205 450 669 801 926
130,000 140,000 232 510 758 908 1,049
140,000 150,000 260 570 847 1,015 1,172
150,000 160,000 287 630 936 1,122 1,296
160,000 170,000 314 691 1,024 1,230 1,419
170,000 180,000 342 750 1,114 1,336 1,543
180,000 190,000 369 810 1,204 1,442 1,666
190,000 200,000 396 871 1,292 1,550 1,789
200,000 210,000 424 930 1,382 1,656 1,913
210,000 220,000 451 991 1,470 1,764 2,036
220,000 230,000 478 1,051 1,559 1,871 2,159
230,000 240,000 505 1,111 1,649 1,977 2,283
240,000 and over 533 1,171 1,738 2,084 2,406

SECTION 5. EFFECTIVE DATE
This revenue procedure applies to passenger automobiles that a taxpayer first
places in service or first leases during calendar year 2018.
SECTION 6. DRAFTING INFORMATION

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The principal author of this revenue procedure is Bernard P. Harvey of the Office
of Associate Chief Counsel (Income Tax & Accounting). For further information
regarding this revenue procedure, contact Mr. Harvey at (202) 317-7005 (not a toll-free
call).