Instructions For Form 2106 - Employee Business Expenses

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2. If you do not make the election

than the percentage on line 14

Equipped with a cargo area of at

described in (1), you must figure

multiplied by the applicable limit

least 6 feet in interior length that is an

depreciation separately for the

explained in the line 36 instructions

open area or is designed for use as

remaining basis of the old vehicle and

(see page 8). Your section 179

an open area but is enclosed by a

for any additional amount you paid for

deduction for the year cannot be

cap and is not readily accessible

the new vehicle. You must apply two

more than the income from your job

directly from the passenger

depreciation limits (see page 8). The

and any other active trade or

compartment, or

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limit that applies to the remaining

business on your Form 1040.

That has an integral enclosure,

basis of the old vehicle generally is

fully enclosing the driver

If you are claiming a section

the amount that would have been

compartment and load carrying

179 deduction on other

allowed had you not traded in the old

device, does not have seating

property, or you placed more

CAUTION

vehicle. The limit that applies to the

rearward of the driver’s seat, and has

than $430,000 of section 179

additional amount you paid for the

no body section protruding more than

property in service during the year,

new vehicle generally is the limit that

30 inches ahead of the leading edge

use Form 4562 to figure your section

applies for the tax year it was placed

of the windshield.

179 deduction. Enter the amount of

in service, reduced by the

the section 179 deduction allocable to

Special depreciation allowance.

depreciation allowance for the

your vehicle (from Form 4562, line

You may be able to claim a special

remaining basis of the old vehicle.

12) on Form 2106, line 31.

depreciation allowance for your new

You must use Form 4562 to compute

vehicle if:

Note. For section 179 purposes,

your depreciation deduction. You

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You purchased it on or after August

the cost of the new vehicle does not

cannot use Form 2106, Part II,

28, 2005,

include the adjusted basis of the

Section D.

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vehicle you traded in.

You placed it in service during

If you elect to use the method

2006,

Example.

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described in (1), you must do so on a

The percentage on line 14 is more

timely filed tax return (including

than 50%, and

Cost including taxes . . . . . . . .

$25,000

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extensions). Otherwise, you must use

Your vehicle is qualified Gulf

− 3,000

Adjusted basis of trade-in . . . .

the method described in (2).

Opportunity (GO) Zone property.

Line 30. Enter the vehicle’s actual

Section 179 basis . . . . . . . . . .

$22,000

The special allowance is an

cost (including sales tax) or other

Limit on depreciation and

additional first year depreciation

basis (unadjusted for prior years’

section 179 deduction . . . . . . .

$ 2,960

deduction of 50% of the depreciable

depreciation). If you traded in your

basis of your vehicle. However, your

vehicle, your basis is the adjusted

Smaller of:

total section 179 deduction, special

basis of the old vehicle (figured as if

depreciation allowance, and regular

Section 179 basis, or limit on

100% of the vehicle’s use had been

depreciation deduction cannot be

depreciation and section 179

for business purposes) plus any

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

$ 2,960

more than $2,960 for cars, $3,260 for

additional amount you pay for your

trucks and vans, and $8,980 for

new vehicle. Reduce your basis by

× .75

Percentage on line 14 . . . . . . .

electric cars. See the line 36

any alternative motor vehicle credit,

Section 179 deduction . . . . . .

$ 2,220

instruction for depreciation limits.

qualified electric vehicle credit, diesel

fuel credit, or deduction for clean-fuel

Limit for sport utility and certain

You can elect not to claim the GO

vehicles you claimed.

other vehicles. For sport utility and

Zone special depreciation allowance

If you converted the vehicle from

certain other vehicles placed in

for your car. If you make this election,

personal use to business use, your

service in 2006, the portion of

it applies to all property in the same

basis for depreciation is the smaller of

vehicle’s cost taken into account in

class placed in service during the

the vehicle’s adjusted basis or its fair

figuring your section 179 deduction is

year.

market value on the date of

limited to $25,000. This rule applies

To make the election, attach a

conversion.

to any 4-wheeled vehicle primarily

statement to your return indicating

Line 31. If 2006 is the first year your

designed or used to carry passengers

that you are electing not to claim the

vehicle was placed in service and the

over public streets, roads, or

GO Zone special depreciation

percentage on line 14 is more than

highways, that is not subject to any of

allowance and the class of property

50%, you can elect to deduct as an

the passenger automobile limits

for which you are making the election.

expense a portion of the cost (subject

explained in the line 36 instructions,

to a yearly limit). To calculate this

and is rated at no more than 14,000

See Pub. 463, chapter 4, for more

section 179 deduction, multiply the

pounds gross vehicle weight.

information on the special

part of the cost of the vehicle that you

However, the $25,000 limit does not

depreciation allowance.

choose to expense by the percentage

apply to any vehicle:

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Use the worksheet on page 7 to

on line 14. The total of your

Designed to have a seating

figure the amount of the special

depreciation and section 179

capacity of more than nine persons

depreciation allowance.

deduction generally cannot be more

behind the driver’s seat, or

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Instructions For Form 2106 - Employee Business Expenses - 2006 Page 6

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