Publication 553 - Highlights Of 2003 Tax Changes - Department Of The Treasury (Page 6 of 23) in pdf

makes this choice, he or she must write “Section 2201” at

off-the-shelf computer software placed in service after

the top of page 1 of the return.

2002. This is computer software that is readily available for

purchase by the general public, is subject to a nonexclu-

sive license, and has not been substantially modified. It

Standard Mileage Rate

includes any program designed to cause a computer to

perform a desired function. However, a database or similar

Business-related mileage. For 2003, the standard mile-

item is not considered computer software unless it is in the

age rate for the cost of operating your car, van, pickup, or

public domain and is incidental to the operation of other-

panel truck is decreased from 36

cents a mile to 36 cents

wise qualifying software. See Eligible Property in chapter 2

a mile for all business miles.

of Publication 946.

Car expenses and use of the standard mileage rate are

explained in chapter 4 of Publication 463, Travel, Enter-

Revocation of section 179 election. A section 179 de-

tainment, Gift, and Car Expenses.

duction election (or any specification made in the election)

made after 2002 can be revoked without IRS approval by

Medical- and move-related mileage. For 2003, the stan-

filing an amended return. However, once made, the revo-

dard mileage rate for the cost of operating your car for

cation is irrevocable.

medical reasons or as part of a deductible move is de-

creased from 13 cents a mile to 12 cents a mile. See

Transportation under What Medical Expenses Are Deduct-

Passenger Automobiles

ible in Publication 502, Medical and Dental Expenses, or

Travel by car under Deductible Moving Expenses in Publi-

Exclusion of qualified nonpersonal use trucks and

cation 521, Moving Expenses.

vans from definition of passenger automobile. A truck

or van placed in service after July 6, 2003, that is a

Self-Employed Health

“qualified nonpersonal use vehicle” is not considered to be

Insurance Deduction

a passenger automobile (and is therefore not subject to the

passenger automobile limits). A truck or van is a qualified

Beginning in 2003, the self-employed health insurance

nonpersonal use vehicle only if it has been specially modi-

deduction percentage increases to 100%. For more infor-

fied such that it is not likely to be used more than a de

mation, see chapter 7 in Publication 535, Business Ex-

minimis amount for personal purposes. For example, a van

penses.

that has only a front bench for seating, in which permanent

shelving has been installed, that constantly carries mer-

Depreciation and

chandise or equipment, and that has been specially

painted with advertising or the company’s name, is a vehi-

Section 179 Expense

cle not likely to be used more than a de minimis amount for

personal purposes. See Passenger Automobiles in chap-

50% special depreciation allowance. For “qualified

ter 5 of Publication 946.

property” you acquired after May 5, 2003, and before

Depreciation limits on passenger automobiles. The

January 1, 2005, you can take a special depreciation

total depreciation deduction (including the section 179

allowance that is equal to 50% of the property’s deprecia-

deduction and the special depreciation allowance) you can

ble basis. However, instead of claiming the 50% special

take for a passenger automobile (that is not a truck or van

allowance, you can elect to claim the 30% special allow-

or an electric vehicle) that you use in your business and

ance or elect not to claim any special allowance. See

first place in service in 2003 is:

chapter 3 in Publication 946, How To Depreciate Property.

•

$7,660 if acquired before May 6, 2003, and you

Note. If you acquire qualified property in a like-kind

claim the 30% special allowance;

exchange or involuntary conversion, the carried-over basis

•

$10,710 if acquired after May 5, 2003, and you claim

of the acquired property is eligible for a special deprecia-

the 50% or 30% special allowance; or

tion allowance. See the discussion on like-kind exchanges

•

and involuntary conversions under How Much Can You

$3,060 if you elect not to claim any special allow-

Deduct? in chapter 3 of Publication 946.

ance for the vehicle, the vehicle is not qualified prop-

erty, or the vehicle is qualified Liberty Zone property.

Increased section 179 limits. The maximum section 179

deduction you can elect for property you placed in service

in 2003 increased from $24,000 to $100,000 for qualified

The limits are reduced if the business use of the

section 179 property ($135,000 for qualified zone property,

vehicle is less than 100%.

qualified renewal property, or qualified New York Liberty

CAUTION

Zone property). This limit is reduced by the amount by

which the cost of section 179 property placed in service

during the tax year exceeds $400,000 (increased from

Depreciation limits on trucks or vans. The total depre-

$200,000). See chapter 2 of Publication 946.

ciation deduction (including the section 179 deduction and

Off-the-shelf computer software. The definition of sec-

the special depreciation allowance) you can take for a

tion 179 property has been expanded to include

truck or van (such as a minivan or a sport utility vehicle)

Page 6

Chapter 1 Tax Changes for Individuals

Publication 553 - Highlights Of 2003 Tax Changes - Department Of The Treasury Page 6

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