| Instructions for Form 2106 |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Part I—Employee Business Expenses and Reimbursements
Fill in all of Part I if you were reimbursed for employee business expenses. If you were not reimbursed for your expenses,
skip line 7 and complete
the rest of Part I.
Step 1—Enter Your Expenses
Line 1.
If you were a rural mail carrier, you can treat the amount of qualified reimbursement you received as the amount of
your allowable expense. Because
the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of reimbursement
in your income.
You were a rural mail carrier if you were an employee of the United States Postal Service (USPS) who performed services
involving the collection
and delivery of mail on a rural route.
Qualified reimbursements.
These are the amounts paid by the USPS as an equipment maintenance allowance under a collective bargaining agreement
between the USPS and the
National Rural Letter Carriers' Association, but only if such amounts do not exceed the amount that would have been paid under
the 1991 collective
bargaining agreement (adjusted for changes in the Consumer Price Index since 1991).
If you were a rural mail carrier and your vehicle expenses were:
-
Less than or equal to your qualified reimbursements, do not file Form 2106 unless you have deductible expenses other than
vehicle expenses.
If you have deductible expenses other than vehicle expenses, skip line 1 and do not include any qualified reimbursements in
column A on line
7.
-
More than your qualified reimbursements, complete Part II of Form 2106. Enter your total vehicle expenses from line 29 on
line 1 and the
amount of your qualified reimbursements in column A on line 7.
If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate.
Line 2.
The expenses of commuting to and from work are not deductible. See the line 15 instructions for the definition of
commuting.
Line 3.
Enter lodging and transportation expenses connected with overnight travel away from your tax home (defined next).
Do not include expenses for meals
and entertainment. For more details, including limits, see Pub. 463.
Tax home.
Generally, your tax home is your regular or main place of business or post of duty regardless of where you maintain
your family home. If you do not
have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly
live. If you do not
fit in either of these categories, you are considered an itinerant and your tax home is wherever you work. As an itinerant,
you are never away from
home and cannot claim a travel expense deduction. For more details on the definition of a tax home, see Pub. 463.
Generally, you cannot deduct any expenses for travel away from your tax home for any period of temporary employment
of more than 1 year. However,
this rule does not apply for any period in which you were a federal employee certified by the Attorney General as traveling
in temporary duty status
for the U.S. government to investigate or prosecute a federal crime (or to provide support services for the investigation
or prosecution of that
crime).
Incidental expenses.
The term “ incidental expenses” means:
-
Fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and
hotel servants in
foreign countries;
-
Transportation between places of lodging or business and places where meals are taken, if suitable meals can be obtained at
the temporary
duty site; and
-
Mailing cost associated with filing travel vouchers and payment of employer-sponsored charge card billings.
Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, or the
costs of telegrams or telephone
calls.
You can use an optional method (instead of actual cost) for deducting incidental expenses only. The amount of the
deduction is $3 a day for
incidental expenses paid or incurred for travel away from home in 2006. You can use this method only if you did not pay or
incur any meal expenses.
You cannot use this method on any day you use the standard meal allowance (defined in the instructions for line 5).
Line 4.
Enter other job-related expenses not listed on any other line of this form. Include expenses for business gifts, education
(tuition, fees and
books), home office, trade publications, etc. For details, including limits, see Pub. 463 and Pub. 529.
At the time these instructions went to print, Congress was considering legislation that would extend the deductions for educator
expenses and
tuition and fees that expired at the end of 2005. While certain of these expenses may be deductible on Form 2106, it may be
to your benefit to deduct
them on your tax return as adjustments to your total income. To find out if this legislation was enacted, and for more details,
go to
www.irs.gov, click on More Forms and Publications, and then on What's Hot in
forms and publications, or see Pub. 553, Highlights of 2006 Tax Changes.
If you are deducting home office expenses, see Pub. 587 for special instructions on how to report these expenses.
If you are deducting depreciation or claiming a section 179 deduction for a cellular telephone or other similar telecommunications
equipment, a
home computer, etc., see Form 4562, Depreciation and Amortization, to figure the depreciation and section 179 deduction to
enter on Form 2106, line 4.
You may be able to take a credit for your educational expenses instead of a deduction. See Form 8863, Education Credits, for
details.
Do not include expenses for meals and entertainment, taxes, or interest on line 4. Deductible taxes are entered on
Schedule A (Form 1040), lines 5
through 9 (or Schedule A (Form 1040NR), lines 1 through 3). Employees cannot deduct car loan interest.
Note.
If line 4 is your only entry, do not complete Form 2106 unless you are claiming:
-
Performing-arts-related business expenses as a qualified performing artist,
-
Expenses for performing your job as a fee-basis state or local government official, or
-
Impairment-related work expenses as an individual with a disability.
See the line 10 instructions for definitions. If you are not required to file Form 2106, enter your expenses directly on Schedule
A (Form
1040), line 20 (or Schedule A (Form 1040NR), line 9).
Line 5.
Enter your allowable meals and entertainment expense. Include meals while away from your tax home overnight and other
business meals and
entertainment.
Standard meal allowance.
Instead of actual cost, you may be able to claim the standard meal allowance for your daily meals and incidental expenses
while away from your tax
home overnight. Under this method, instead of keeping records of your actual meal expenses, you deduct a specified amount,
depending on where you
travel. However, you must still keep records to prove the time, place, and business purpose of your travel.
The standard meal allowance is the federal M&IE rate. For most small localities in the United States, this rate is
$39 a day for the period
from January 1 through December 31, 2006. Most major cities and many other localities in the United States qualify for higher
rates. You can find
these rates on the Internet at
www.gsa.gov. At the GSA home page click on “ Per Diem Rates.” At the Domestic Per Diem Rates page select “ 2006” for
the rates in effect for the period January 1, 2006-September 30, 2006. Select “ 2007” for the period October 1, 2006-December 31,
2006. However, you can apply the rates in effect before October 1, 2006, for expenses of all travel within the United States
for 2006 instead of the
updated rates. For the period October 1, 2006-December 31, 2006, you must consistently use either the rates for the first
9 months of 2006 or
the updated rates.
For locations outside the continental United States, the applicable rates are published each month. You can find these
rates on the Internet at
www.state.gov.
See Pub. 463 for details on how to figure your deduction using the standard meal allowance, including special rules
for partial days of travel and
transportation workers.
Step 2—Enter Reimbursements Received From Your Employer for Expenses Listed in Step 1
Line 7.
Enter reimbursements received from your employer (or third party) for expenses shown in Step 1 that were not reported
to you in box 1 of your Form
W-2. This includes reimbursements reported under code “ L” in box 12 of Form W-2. Amounts reported under code “ L” are reimbursements you
received for business expenses that were not included as wages on Form W-2 because the expenses met specific IRS substantiation
requirements.
Generally, when your employer pays for your expenses, the payments should not be included in box 1 of your Form W-2
if, within a reasonable period
of time, you:
-
Accounted to your employer for the expenses, and
-
Were required to return, and did return, any payment not spent (or considered not spent) for business expenses.
If these payments were included in box 1, ask your employer for a corrected Form W-2.
Accounting to your employer.
This means that you gave your employer documentary evidence and an account book, diary, or similar statement to verify
the amount, time, place, and
business purpose of each expense. You are also treated as having accounted for your expenses if either of the following applies.
-
Your employer gave you a fixed travel allowance that is similar in form to the per diem allowance specified by the Federal
Government and
you verified the time, place, and business purpose of the travel for that day.
-
Your employer reimbursed you for vehicle expenses at the standard mileage rate or according to a flat rate or stated schedule,
and you
verified the date of each trip, mileage, and business purpose of the vehicle use.
See Pub. 463 for more details.
Allocating your reimbursement.
If your employer paid you a single amount that covers meals and entertainment as well as other business expenses,
you must allocate the
reimbursement so that you know how much to enter in Column A and Column B of line 7. Use the following worksheet to figure
this allocation.
Reimbursement Allocation Worksheet (keep for your records)
| 1. |
Enter the total amount of reimbursements your employer gave you that were not reported to you
in box 1 of Form W-2
|
|
| 2. |
Enter the total amount of your expenses for the periods covered by this reimbursement
|
|
| 3. |
Of the amount on line 2, enter your total expense for meals and entertainment . .
|
|
| 4. |
Divide line 3 by line 2.
Enter the result as a decimal (rounded to
three places)
|
|
| 5. |
Multiply line 1 by line 4. Enter the result here and
in Column B, line 7
|
|
| 6. |
Subtract line 5 from line 1. Enter the result here and
in Column A, line 7
|
|
Step 3—Figure Expenses To Deduct on Schedule A (Form 1040 or Form 1040NR)
Line 9.
Generally, you can deduct only 50% of your business meal and entertainment expenses, including meals incurred while
away from home on business.
However, if you were an employee subject to the Department of Transportation (DOT) hours of service limits, that percentage
is increased to 75% for
business meals consumed during, or incident to, any period of duty for which those limits are in effect.
Employees subject to the DOT hours of service limits include certain air transportation employees, such as pilots,
crew, dispatchers, mechanics,
and control tower operators; interstate truck operators and interstate bus drivers; certain railroad employees, such as engineers,
conductors, train
crews, dispatchers, and control operations personnel; and certain merchant mariners.
Line 10.
If you are one of the individuals discussed below, special rules apply to deducting your employee business expenses.
Any part of the line 10 total
that is not deducted according to the special rules should be entered on Schedule A (Form 1040), line 20 (or Schedule A (Form
1040NR), line 9).
Ministers.
Before entering your total expenses on line 10, you must reduce them by the amount allocable to your tax-free allowance(s).
See Pub. 517 for more
information.
Armed Forces reservist (member of a reserve component).
You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine
Corps, Air Force, or Coast
Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps
of the Public Health
Service.
If you qualify, include the part of the line 10 amount attributable to the expenses for travel more than 100 miles
away from home in connection
with your performance of services as a member of the reserves on Form 1040, line 24, and attach Form 2106 to your return.
These reserve-related travel
expenses are deductible whether or not you itemize deductions. See Pub. 463 for additional details on how to report these
expenses.
Fee-basis state or local government official.
You are a qualifying fee-basis official if you are employed by a state or political subdivision of a state and are
compensated, in whole or in
part, on a fee basis.
If you qualify, include the part of the line 10 amount attributable to the expenses you incurred for services performed
in that job in the total on
Form 1040, line 24, and attach Form 2106 to your return. These employee business expenses are deductible whether or not you
itemize deductions.
Qualified performing artist.
You are a qualified performing artist if you:
-
Performed services in the performing arts as an employee for at least two employers during the tax year,
-
Received from at least two of those employers wages of $200 or more per employer,
-
Had allowable business expenses attributable to the performing arts of more than 10% of gross income from the performing arts,
and
-
Had adjusted gross income of $16,000 or less before deducting expenses as a performing artist.
In addition, if you are married, you must file a joint return unless you lived apart from your spouse for all of 2006. If
you file a joint
return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. However, requirement (4) applies
to the combined
adjusted gross income of both you and your spouse.
If you meet all the requirements, include the part of the line 10 amount attributable to performing-arts-related expenses
in the total on Form
1040, line 24 (or Form 1040NR, line 34), and attach Form 2106 to your return. Your performing-arts-related business expenses
are deductible whether or
not you itemize deductions.
Disabled employee with impairment-related work expenses.
Impairment-related work expenses are the allowable expenses of an individual with physical or mental disabilities
for attendant care at his or her
place of employment. They also include other expenses in connection with the place of employment that enable the employee
to work. See Pub. 463 for
more details.
If you qualify, enter the part of the line 10 amount attributable to impairment-related work expenses on Schedule
A (Form 1040), line 27 (or
Schedule A (Form 1040NR), line 16). These expenses are not subject to the 2% limit that applies to most other employee business
expenses.
There are two methods for computing vehicle expenses—the standard mileage rate and the actual expense method. You can use
the standard
mileage rate for 2006 only if:
-
You owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service, or
-
You leased the vehicle and are using the standard mileage rate for the entire lease period (except the period, if any, before
1998).
You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle.
If you have the option of using either the standard mileage rate or actual expense method, you should figure your expenses
both ways to find the
method most beneficial to you. But when completing Form 2106, fill in only the sections that apply to the method you choose.
If you were a rural mail carrier and received an equipment maintenance allowance, see the line 1 instructions.
For more information on the standard mileage rate and actual expenses, see Pub. 463.
Section A—General Information
If you used two vehicles for business during the year, use a separate column in Sections A, C, and D for each vehicle. If
you used more than two
vehicles, complete and attach a second Form 2106, page 2.
Line 11.
Date placed in service is generally the date you first start using your vehicle. However, if you first start using
your vehicle for personal use
and later convert it to business use, the vehicle is treated as placed in service on the date you started using it for business.
Line 12.
Enter the total number of miles you drove each vehicle during 2006. But if you converted your vehicle during the year
from personal to business use
(or vice versa), enter the total miles for only the months you drove the vehicle for business.
Line 13.
Do not include commuting miles on this line; commuting miles are not considered business miles. See the line 15 instructions
for the definition of
commuting.
Line 14.
Divide line 13 by line 12 to figure your business use percentage. However, if you converted your vehicle during the
year from personal to business
use (or vice versa), multiply this percentage by the number of months you drove the vehicle for business and divide the result
by 12.
Line 15.
Enter your average daily round trip commuting distance. If you went to more than one work location, figure the average.
Commuting.
Generally, commuting is travel between your home and a work location. However, travel that meets any of the following
conditions is not commuting.
-
You have at least one regular work location away from your home and the travel is to a temporary work location in the same
trade or
business, regardless of the distance. Generally, a temporary work location is one where your employment is expected to last
1 year or less. See Pub.
463 for more details.
-
The travel is to a temporary work location outside the metropolitan area where you live and normally work.
-
Your home is your principal place of business under section 280A(c)(1)(A) (for purposes of deducting expenses for business
use of your home)
and the travel is to another work location in the same trade or business, regardless of whether that location is regular or
temporary and regardless
of distance.
Line 16.
If you do not know the total actual miles you used your vehicle for commuting during the year, figure the amount to
enter on line 16 by multiplying
the number of days during the year that you used each vehicle for commuting by the average daily round trip commuting distance
in miles. However, if
you converted your vehicle during the year from personal to business use (or vice versa), enter your commuting miles only
for the period you drove
your vehicle for business.
Section B—Standard Mileage Rate
You may be able to use the standard mileage rate instead of actual expenses to figure the deductible costs of operating a
passenger automobile,
including a van, sport utility vehicle (SUV), pickup, or panel truck.
If you want to use the standard mileage rate for a vehicle you own, you must do so in the first year you place your vehicle
in service. In later
years, you can deduct actual expenses instead, but you cannot use a depreciation method other than straight line.
If you lease your vehicle, you can use the standard mileage rate, but only if you use the rate for the entire lease period
(except for the period,
if any, before January 1, 1998).
If you use more than two vehicles, complete and attach a second Form 2106, page 2, providing the information requested in
lines 11 through 22. Be
sure to include the amount from line 22 of both pages in the total on Form 2106, line 1.
You can also deduct state and local personal property taxes. Enter these taxes on Schedule A (Form 1040), line 7. (Personal
property taxes are not
deductible on Form 1040NR.)
If you are claiming the standard mileage rate for mileage driven in more than one business activity, you must figure the deduction
for each
business on a separate form or schedule (for example, Form 2106 or Schedule C, C-EZ, E, or F).
Section C—Actual Expenses
Line 23.
Enter your total annual expenses for gasoline, oil, repairs, insurance, tires, license plates, and similar items.
Do not include state and local
personal property taxes or interest expense you paid. Deduct state and local personal property taxes on Schedule A (Form 1040),
line 7. Employees
cannot deduct car loan interest.
Line 24a.
If during 2006 you rented or leased instead of using your own vehicle, enter the cost of renting. Also, include on
this line any temporary rentals,
such as when your car was being repaired, except for amounts included on line 3.
Line 24b.
If you leased a vehicle for a term of 30 days or more after June 18, 1984, you may have to reduce your deduction for
vehicle lease payments by an
amount called the inclusion amount. You may have an inclusion amount if:
The lease term
began in: |
And the vehicle's fair market value on the first day of the lease
exceeded: |
|
2005 or 2006
|
$15,200
|
|
2004
|
17,500
|
|
2003
|
18,000
|
|
1999 through 2002
|
15,500
|
|
1997 or 1998
|
15,800
|
If the lease term began before 1997, see Pub. 463 to find out if you have an inclusion amount.
|
See Pub. 463 to figure the inclusion amount.
Line 25.
If during 2006 your employer provided a vehicle for your business use and included 100% of its annual lease value
in box 1 of your Form W-2, enter
this amount on line 25. If less than 100% of the annual lease value was included in box 1 of your Form W-2, skip line 25.
Line 28.
If you completed Section D, enter the amount from line 38. If you used Form 4562 to figure your depreciation deduction,
enter the total of the
following amounts.
-
Depreciation allocable to your vehicle(s) (from Form 4562, line 28).
-
Any section 179 deduction allocable to your vehicle(s) (from Form 4562, line 29).
Section D—Depreciation of Vehicles
Depreciation is an amount you can deduct to recover the cost or other basis of your vehicle over a certain number of years.
In some cases, you can
elect to expense, under section 179, part of the cost of your vehicle in the year of purchase. For details, see Pub. 463.
At the time these instructions went to print, Congress was considering legislation that would extend many expiring provisions.
The sales tax
deduction (affecting basis) and faster recovery periods for certain Indian reservation property are among them. To find out
if this legislation was
enacted, and for more details, go to
www.irs.gov, click on More Forms and Publications, and then on What's Hot in
forms and publications, or see Pub. 553, Highlights of 2006 Tax Changes.
Vehicle trade-in.
If you traded one vehicle (the “ old vehicle”) in on another vehicle (the “ new vehicle”) in 2006, there are two ways you can treat the
transaction.
-
You can elect to treat the transaction as a tax-free disposition of the old vehicle and the purchase of the new vehicle. If
you make this
election, you treat the old vehicle as disposed of at the time of the trade-in. The depreciable basis of the new vehicle is
the adjusted basis of the
old vehicle (figured as if 100% of the vehicle's use had been for business purposes) plus any additional amount you paid for
the new vehicle. You then
figure your depreciation deduction for the new vehicle beginning with the date you placed it in service. You make this election
by completing Form
2106, Part II, Section D.
-
If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old
vehicle and for
any additional amount you paid for the new vehicle. You must apply two depreciation limits (see page 8). The limit that applies
to the remaining basis
of the old vehicle generally is the amount that would have been allowed had you not traded in the old vehicle. The limit that
applies to the
additional amount you paid for the new vehicle generally is the limit that applies for the tax year it was placed in service,
reduced by the
depreciation allowance for the remaining basis of the old vehicle. You must use Form 4562 to compute your depreciation deduction.
You cannot use Form
2106, Part II, Section D.
If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions).
Otherwise, you must use the
method described in (2).
Line 30.
Enter the vehicle's actual cost (including sales tax) or other basis (unadjusted for prior years' depreciation). If
you traded in your vehicle,
your basis is the adjusted basis of the old vehicle (figured as if 100% of the vehicle's use had been for business purposes)
plus any additional
amount you pay for your new vehicle. Reduce your basis by any alternative motor vehicle credit, qualified electric vehicle
credit, diesel fuel credit,
or deduction for clean-fuel vehicles you claimed.
If you converted the vehicle from personal use to business use, your basis for depreciation is the smaller of the
vehicle's adjusted basis or its
fair market value on the date of conversion.
Line 31.
If 2006 is the first year your vehicle was placed in service and the percentage on line 14 is more than 50%, you can
elect to deduct as an expense
a portion of the cost (subject to a yearly limit). To calculate this section 179 deduction, multiply the part of the cost
of the vehicle that you
choose to expense by the percentage on line 14. The total of your depreciation and section 179 deduction generally cannot
be more than the percentage
on line 14 multiplied by the applicable limit explained in the line 36 instructions (see page 8). Your section 179 deduction
for the year cannot be
more than the income from your job and any other active trade or business on your Form 1040.
If you are claiming a section 179 deduction on other property, or you placed more than $430,000 of section 179 property in
service during the year,
use Form 4562 to figure your section 179 deduction. Enter the amount of the section 179 deduction allocable to your vehicle
(from Form 4562, line 12)
on Form 2106, line 31.
Note.
For section 179 purposes, the cost of the new vehicle does not include the adjusted basis of the vehicle you traded
in.
Example.
|
Cost including taxes
|
$25,000
|
|
Adjusted basis of trade-in
|
- 3,000
|
|
Section 179 basis
|
$22,000
|
|
Limit on depreciation and section 179 deduction
|
$2,960
|
| Smaller of: |
|
|
Section 179 basis, or limit on depreciation and section 179 deduction
|
$2,960
|
|
Percentage on line 14
|
×.75
|
|
Section 179 deduction
|
$2,220
|
Limit for sport utility and certain other vehicles.
For sport utility and certain other vehicles placed in service in 2006, the portion of vehicle's cost taken into account
in figuring your section
179 deduction is limited to $25,000. This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers
over public streets,
roads, or highways, that is not subject to any of the passenger automobile limits explained in the line 36 instructions, and
is rated at no more than
14,000 pounds gross vehicle weight. However, the $25,000 limit does not apply to any vehicle:
-
Designed to have a seating capacity of more than nine persons behind the driver's seat, or
-
Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area
but is enclosed
by a cap and is not readily accessible directly from the passenger compartment, or
-
That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward
of the
driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.
Special depreciation allowance.
You may be able to claim a special depreciation allowance for your new vehicle if:
-
You purchased it on or after August 28, 2005,
-
You placed it in service during 2006,
-
The percentage on line 14 is more than 50%, and
-
Your vehicle is qualified Gulf Opportunity (GO) Zone property.
The special allowance is an additional first year depreciation deduction of 50% of the depreciable basis of your vehicle.
However, your total
section 179 deduction, special depreciation allowance, and regular depreciation deduction cannot be more than $2,960 for cars,
$3,260 for trucks and
vans, and $8,980 for electric cars. See the line 36 instruction for depreciation limits.
You can elect not to claim the GO Zone special depreciation allowance for your car. If you make this election, it
applies to all property in the
same class placed in service during the year.
To make the election, attach a statement to your return indicating that you are electing not to claim the GO Zone
special depreciation allowance
and the class of property for which you are making the election.
See Pub. 463, chapter 4, for more information on the special depreciation allowance.
Use the worksheet on page 7 to figure the amount of the special depreciation allowance.
Worksheet for the Special Depreciation Allowance (keep for your records)
| 1. |
Enter the total amount from line 30
|
|
| 2. |
Multiply line 1 by the percentage on Form 2106, line 14, and enter the result
|
|
| 3. |
Enter any section 179 deduction
|
|
| 4. |
Subtract line 3 from line 2
|
|
| 5. |
Multiply line 4 by 50% (.50) and enter the result
|
|
| 6. |
Multiply the applicable limit explained in the line 36 instructions by the percentage on Form 2106, line
14, and enter the result. If line 36 limits do not apply, skip lines 6 and 7, and enter the amount from line 5 on line 8
|
|
| 7. |
Subtract line 3 from line 6
|
|
| 8. |
Enter the smaller of line 5 or line 7. Add the result to any section 179 deduction and enter the total on Form 2106, line
31
|
|
Line 32.
To figure the basis for depreciation, multiply line 30 by the percentage on line 14. From that result, subtract the
full amount of any section 179
deduction and special depreciation allowance.
Line 33.
If you used the standard mileage rate in the first year the vehicle was placed in service and now elect to use the
actual expense method, you must
use the straight line method of depreciation for the vehicle's estimated useful life. Otherwise, use the Depreciation Method
and Percentage Chart
above to find the depreciation method and percentage to enter on line 33.
To use the chart, first find the date you placed the vehicle in service (line 11). Then, select the depreciation method
and percentage from column
(a), (b), or (c). For example, if you placed a car in service on July 1, 2006, and you use the method in column (a), enter
“ 200 DB 20%” on line
33.
For vehicles placed in service before 2006, use the same method you used on last year's return unless a decline in
your business use requires a
change to the straight line method. For vehicles placed in service during 2006, select the depreciation method and percentage
after reading the explanation for each column.
Column (a)—200% declining balance method.
You can use column (a) only if the business use percentage on line 14 is more than 50%. Of the three depreciation
methods, the 200% declining
balance method may give you the largest depreciation deduction for the first 3 years (after considering the depreciation limit
for your vehicle). See
the depreciation limit tables on page 8.
Column (b)—150% declining balance method.
You can use column (b) only if the business use percentage on line 14 is more than 50%. The 150% declining balance
method may give you a smaller
depreciation deduction than in column (a) for the first 3 years. However, you will not have a “ depreciation adjustment” on this vehicle for the
alternative minimum tax. This may result in a smaller tax liability if you must file Form 6251, Alternative Minimum Tax—Individuals.
Column (c)—straight line method.
You must use column (c) if the business use percentage on line 14 is 50% or less. The method for these vehicles is
the straight line method over 5
years. The use of this column is optional for these vehicles if the business use percentage on line 14 is more than 50%.
Note.
If your vehicle was used more than 50% for business in the year it was placed in service and used 50% or less in a later year,
part of the
depreciation and section 179 deduction previously claimed may have to be added back to your income in the later year. Figure
the amount to be included
in income on Form 4797, Sales of Business Property.
If you placed other business property in service during the year you placed your vehicle in service you may not be able to
use the chart. See Pub.
946 to figure your depreciation.
Line 34.
If you sold or exchanged your vehicle during the year, use the following instructions to figure the amount to enter
on line 34.
If your vehicle was placed in service:
-
Before 2001, enter the result of multiplying line 32 by the percentage on line 33;
-
After 2000, from January 1 through September 30, enter the amount figured by multiplying the result in (1) by 50%; or
-
After 2000, from October 1 through December 31 (or during 2001 and you did not make the election under Notice 2001-70), enter
the amount
figured by multiplying the result in (1) by the percentage shown below for the month you disposed of the vehicle.
| Month |
Percentage |
|
Jan., Feb., March
|
12.5%
|
|
April, May, June
|
37.5%
|
|
July, Aug., Sept.
|
62.5%
|
|
Oct., Nov., Dec.
|
87.5%
|
Line 36.
Using the applicable chart for your type of vehicle, find the date you placed your vehicle in service. Then, enter
on line 36 the corresponding
amount from the “ Limit” column. Before using the charts, please read the following definitions.
-
A passenger automobile is a 4-wheeled vehicle manufactured primarily for use on public roads that is rated at 6,000 pounds
unloaded gross
vehicle weight or less (for a truck or van, gross vehicle weight is substituted for unloaded gross vehicle weight). Certain
vehicles, such as
ambulances, hearses, and taxicabs, are not considered passenger automobiles and are not subject to the line 36 limits. See
Pub. 463 for more
details.
-
A truck or van is a passenger automobile built on a truck chassis, including a minivan or a sport utility vehicle built on
a truck
chassis.
-
An electric automobile is a vehicle produced by an original equipment manufacturer and designed to run primarily on electricity.
Gasoline-
electric hybrid vehicles that are not designed to run primarily on electricity (such as the Ford Escape Hybrid, the Honda
Insight, and Toyota Prius)
are not electric passenger vehicles.
If your vehicle is not subject to any of the line 36 limits, skip lines 36 and 37, and enter the amount from line
35 on line 38.
Exception for clean-fuel modifications.
For vehicles placed in service after August 5, 1997, and before January 1, 2006, the passenger automobile limits (including
those for trucks and
vans) do not apply to the cost of any qualified clean-fuel vehicle property (such as retrofit parts and components) installed
on a vehicle for the
purpose of permitting that vehicle to run on a clean-burning fuel. See section 179A for definitions.
Limits for Passenger Automobiles (Except Electric Automobiles Placed in Service After August 5, 1997, Trucks, and Vans)
Date Vehicle Was
Placed in Service |
Limit |
|
Jan. 1 - Dec. 31, 2006
|
$2,960
|
|
Jan. 1 - Dec. 31, 2005
|
4,700
|
|
Jan. 1 - Dec. 31, 2004
|
2,850
|
|
Jan. 1, 1995 - Dec. 31, 2003
|
1,775
|
|
Jan. 1, 1993 - Dec. 31, 1994
|
1,675
|
|
Jan. 1, 1991 - Dec. 31, 1992
|
1,575
|
|
Jan. 1, 1987 - Dec. 31, 1990
|
1,475
|
Limits for Trucks and Vans
Date Vehicle Was
Placed in Service |
Limit |
|
Jan. 1 - Dec. 31, 2006
|
$3,260
|
|
Jan. 1 - Dec. 31, 2005
|
5,200
|
|
Jan. 1 - Dec. 31, 2004
|
3,150
|
|
Jan. 1 - Dec. 31, 2003
|
1,975
|
|
Jan. 1, 1995 - Dec. 31, 2002
|
1,775
|
|
Jan. 1, 1993 - Dec. 31, 1994
|
1,675
|
|
Jan. 1, 1991 - Dec. 31, 1992
|
1,575
|
|
Jan. 1, 1987 - Dec. 31, 1990
|
1,475
|
Limits for Electric Automobiles Placed in Service After August 5, 1997
Date Vehicle Was
Placed in Service |
Limit |
|
Jan. 1 - Dec. 31, 2006
|
$ 8,980
|
|
Jan. 1 - Dec. 31, 2005
|
14,200
|
|
Jan. 1 - Dec. 31, 2004
|
8,550
|
|
Jan. 1 - Dec. 31, 2003
|
5,225
|
|
Jan. 1, 1999 - Dec. 31, 2002
|
5,325
|
|
Aug. 6, 1997 - Dec. 31, 1998
|
5,425
|
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