For tax years before 1990, the depreciation rates apply to the first 15,000 miles. For tax years after 1989, the depreciation rates apply to all business miles.

Example. In 1994, you bought a car for exclusive use in your business. The car cost $14,000. From 1994 through 1999, you used the standard mileage rate to figure your car expense deduction. You drove your car 14,100 miles in 1994, 16,300 miles in 1995, 15,600 miles in 1996, 16,700 miles in 1997, 15,100 miles in 1998, and 14,900 miles in 1999. Your depreciation is figured as follows.

At the end of 1999, your adjusted basis in the car is $2,876 ($14,000 - $11,124).

Depreciation deduction for the year of disposition. If you deduct actual car expenses and you dispose of your car before the end of its recovery period, you are allowed a reduced depreciation deduction for the year of disposition.

To figure the reduced depreciation deduction for a car disposed of in 1999, first determine the depreciation deduction for the full year using Table 3.

If you used a Date Placed in Service line for Jan. 1--Sept. 30, you can deduct one-half of the regular depreciation amount for the year of disposition. Figure your depreciation deduction for the full year using the rules explained in this chapter and deduct 50% of that amount with your other actual car expenses.

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