86 Ill. Adm. Code 150.110 — How to Compute Depreciation

# How to Compute Depreciation

TITLE 86: REVENUE CHAPTER I: DEPARTMENT OF REVENUE PART 150 USE TAX SECTION 150.110 HOW TO COMPUTE DEPRECIATION

Section 150.110 How to Compute Depreciation a) For the purpose of determining the "reasonable allowance for depreciation" in the case of motor vehicles brought into the State before July 1, 2024, the Department will presume that the average life expectancy of a motor vehicle is 50 months and that the rate of depreciation that is therefore allowable is 2% of the selling price each month for such period of prior out-of-State use. A fraction of a month (including any period which is less than a month after the date of purchase) will be disregarded. For motor vehicles brought into the State on or after July 1, 2024, for the purpose of determining the "reasonable allowance for depreciation", the Department will presume that the average life expectancy of a motor vehicle is 60 months and that the rate of depreciation that is therefore allowable is 1.67% of the selling price each month for such period of prior out-of-State use. b) For purposes of this Section, a "month" does not mean a calendar month, but means a period of one month from the date of purchase. A fraction of a month (including any period which is less than a month after the date of purchase) will be disregarded. For example, if the motor vehicle was bought on the fifth day of one month, one month of depreciation will be considered to have accrued on the fifth day of the following month. In no case will depreciation be allowed for any period of time before the physical possession of the motor vehicle is delivered to the purchaser. Example: A person purchases a car for $15,000 on July 2 and does not bring the car into Illinois until September 1. The prior out-of-State use is only 1 month since partial months are disregarded. The taxable base will be reduced by $251 (1.67% of $15,000). c) Effective January 1, 1968, as to tangible personal property other than motor vehicles brought into the State before July 1, 2024, a "reasonable allowance for depreciation" is deemed by the Department to be the amount of depreciation determined by use of the straight line method of depreciation. For purposes of depreciation, the service life for tangible personal property other than motor vehicles brought into the State on or after July 1, 2024, shall be the useful life or recovery period allowed under federal law for like kind of property, or in the event of a settlement agreement, the useful life or recovery period agreed to in such settlement between the taxpayer and the Internal Revenue Service or the Department. (Source: Amended at 48 Ill. Reg. 6836, effective April 24, 2024)

Section 150.110 How to Compute Depreciation

a) For the purpose of determining the "reasonable allowance for depreciation" in the case of motor vehicles brought into the State before July 1, 2024, the Department will presume that the average life expectancy of a motor vehicle is 50 months and that the rate of depreciation that is therefore allowable is 2% of the selling price each month for such period of prior out-of-State use. A fraction of a month (including any period which is less than a month after the date of purchase) will be disregarded.

For motor vehicles brought into the State on or after July 1, 2024, for the purpose of determining the "reasonable allowance for depreciation", the Department will presume that the average life expectancy of a motor vehicle is 60 months and that the rate of depreciation that is therefore allowable is 1.67% of the selling price each month for such period of prior out-of-State use.

b) For purposes of this Section, a "month" does not mean a calendar month, but means a period of one month from the date of purchase. A fraction of a month (including any period which is less than a month after the date of purchase) will be disregarded. For example, if the motor vehicle was bought on the fifth day of one month, one month of depreciation will be considered to have accrued on the fifth day of the following month. In no case will depreciation be allowed for any period of time before the physical possession of the motor vehicle is delivered to the purchaser.

Example: A person purchases a car for $15,000 on July 2 and does not bring the car into Illinois until September 1. The prior out-of-State use is only 1 month since partial months are disregarded. The taxable base will be reduced by $251 (1.67% of $15,000).

c) Effective January 1, 1968, as to tangible personal property other than motor vehicles brought into the State before July 1, 2024, a "reasonable allowance for depreciation" is deemed by the Department to be the amount of depreciation determined by use of the straight line method of depreciation. For purposes of depreciation, the service life for tangible personal property other than motor vehicles brought into the State on or after July 1, 2024, shall be the useful life or recovery period allowed under federal law for like kind of property, or in the event of a settlement agreement, the useful life or recovery period agreed to in such settlement between the taxpayer and the Internal Revenue Service or the Department.

(Source: Amended at 48 Ill. Reg. 6836, effective April 24, 2024)