In the year you buy a vehicle and place it in service, you can deduct 50% of
the business portion of the cost as a special depreciation allowance, provided
you use the vehicle more than 50% for business or work. You figure the special
depreciation allowance after the section 179 deduction, if you choose to claim
it, and before calculating depreciation. Both the section 179 deduction and the
special depreciation allowance reduce the basis of your vehicle.
Statement of Election Not to Claim Allowance or to Claim 30%
You can choose not to claim this special allowance, or you can claim a 30%
allowance instead of 50%. If so, you must attach a statement to your tax
return, indicating the class of property (5-year property in this case) and
that you are electing to claim 30% instead of 50%, or that you are electing not
to claim the special depreciation allowance. The election you make will apply
to any other 5-year property you placed in service during the year – the
election is made based on a class of property.
Basis Reduction
If you choose not to claim the special allowance, you need to attach the
statement to your return because if you do not, the basis in your vehicle will
be reduced by the amount of the allowance, even if you do not claim it.