IRC Section 280F: Caps, Bonus Depreciation, and Leasing Rules

Under the Section 280F luxury auto depreciation limits, a passenger automobile placed in service in 2026 for business use can be depreciated no more than $20,300 in the first year if bonus depreciation is claimed, or $12,300 if it is not.¹ The caps apply no matter how much the vehicle cost, and they continue to restrict your deduction every year until basis is fully recovered. They also come with a 50-percent business use gate, a lease inclusion equivalent, and recapture rules that can pull previously claimed deductions back into ordinary income.

2026 Depreciation Caps Year by Year

The IRS adjusts the Section 280F dollar limits each year for inflation. Revenue Procedure 2026-15 sets the caps for vehicles placed in service during calendar year 2026.¹

When bonus depreciation applies:

Year 1: $20,300
Year 2: $19,800
Year 3: $11,900
Each succeeding year: $7,160

When bonus depreciation is not claimed or does not apply:

Year 1: $12,300
Year 2: $19,800
Year 3: $11,900
Each succeeding year: $7,160

These caps lock in for the life of the vehicle based on the year it was placed in service. Later inflation adjustments do not retroactively raise the ceiling on an earlier vehicle. The $7,160 annual limit continues past the standard five-year MACRS recovery period until the vehicle’s basis is fully recovered, which on a more expensive car can stretch the write-off well beyond five years.

Which Vehicles the Caps Apply To

Section 280F defines a passenger automobile as any four-wheeled vehicle designed primarily for use on public roads and rated at 6,000 pounds or less of unloaded gross vehicle weight.² For trucks and vans, the statute swaps in gross vehicle weight (the loaded GVWR on the door sticker) instead of unloaded weight.³ A sedan weighing 5,900 pounds unloaded falls under the caps even if its loaded GVWR exceeds 6,000 pounds. A truck or van is measured by GVWR.

Some vehicles are outside the definition entirely. Ambulances and hearses used directly in a trade or business are excluded, as are vehicles used to transport people or property for hire, such as taxis or delivery trucks operated by a transportation company.² Trucks and vans that qualify as “nonpersonal use vehicles” under IRS regulations are also exempt. A cargo van stripped of rear seats with permanent shelving, or a pickup with a fully enclosed utility bed, typically fits.

Heavy Vehicles Above 6,000 Pounds

Trucks, vans, and SUVs with a GVWR above 6,000 pounds are not passenger automobiles under Section 280F, so the annual caps above do not apply.² This is why heavy pickups, large SUVs, and commercial vans can often be written off entirely in year one through some combination of Section 179 and bonus depreciation.

One catch. SUVs and crossovers with a GVWR above 6,000 pounds but below 14,000 pounds face a Section 179 cap that is lower than the general limit — for 2026, roughly $31,300 to $32,000, with the exact figure published in the IRS’s annual revenue procedure. The cap applies only to the Section 179 portion; you can still claim 100-percent bonus depreciation on the remaining cost and recover the full purchase price in year one. Vehicles with a bed at least six feet long (most full-size pickups) and heavy work vans are not subject to the SUV limitation and qualify for the full Section 179 deduction. The more-than-50-percent business use test still applies.

The 50-Percent Business Use Requirement

A passenger automobile must be used more than 50 percent for qualified business purposes to qualify for accelerated depreciation, bonus depreciation, or Section 179 expensing.² Qualified business use means use in your trade or business. Investment use counts toward your overall depreciation percentage but does not count toward the 50-percent threshold that unlocks accelerated methods.

Commuting does not count as business use. Driving from home to your regular workplace is personal mileage no matter how necessary the commute feels. Personal errands and vacation trips are personal too. Only trade or business miles push you toward the 50-percent line.

The depreciation deduction is then prorated by your actual business-use percentage. Use a vehicle 75 percent for business, and you apply 75 percent to the allowable depreciation amount — still capped by the 280F dollar limits. If business use is 50 percent or less in the year the vehicle is placed in service, bonus depreciation and Section 179 are off the table, and depreciation runs under the Alternative Depreciation System (ADS): straight-line over five years.²

How Bonus Depreciation and Section 179 Interact With the Caps

The One Big Beautiful Bill Act restored 100-percent bonus depreciation for qualified property acquired after January 19, 2025, and made the restoration permanent.⁴ For a passenger automobile purchased and placed in service after that date, the $20,300 first-year cap from Table 1 of Rev. Proc. 2026-15 is the operative limit.¹ The cap, not the bonus depreciation percentage, is what limits your first-year write-off. A vehicle costing $25,000 or $85,000 hits the same $20,300 ceiling. The lower Table 2 limits ($12,300 first year) apply only if you choose not to elect bonus depreciation or the vehicle was acquired before January 20, 2025.

Section 179 does not open a back door. The overall Section 179 limit for 2026 is $2,560,000 across all qualifying property, but for a passenger automobile the Section 179 deduction cannot exceed the 280F first-year cap. Any combination of Section 179, bonus depreciation, and regular MACRS in year one is still bounded by $20,300.¹ The order matters mainly for what happens later if business use falls: Section 179 amounts are subject to recapture, while regular MACRS is recalculated under ADS.

What Happens if Business Use Later Falls Below 50 Percent

This is where 280F gets punitive. If you claimed accelerated depreciation or Section 179 in the year the vehicle was placed in service and business use later drops to 50 percent or less, two things happen at once.

You must switch to ADS for the current year and all remaining years. ADS uses straight-line depreciation over a five-year recovery period, and the 280F dollar caps still apply on top of that calculation. You also recapture the excess: the difference between what you actually deducted under accelerated methods and what ADS would have allowed from the start is added to your ordinary income in the year business use drops.²

The switch to ADS is permanent for that vehicle. Even if business use bounces back to 90 percent later, you cannot return to accelerated depreciation.

Leasing: The Lease Inclusion Amount

Leasing does not sidestep 280F. Instead of capping depreciation, the statute requires lessees of passenger automobiles to include an extra amount in gross income each year of the lease. The purpose is to put lessees on roughly equal footing with buyers subject to the depreciation caps.⁵

The IRS publishes lease inclusion tables in the same revenue procedure that sets the depreciation caps. For a lease term beginning in 2026, no inclusion amount applies if the vehicle’s fair market value at the start of the lease is $62,000 or less. Above that threshold, the amounts increase with the vehicle’s value and grow across the years of the lease.¹ The inclusion is prorated for days in the lease term during the tax year and for business-use percentage. If business use on a leased vehicle later drops to 50 percent or less, recapture rules similar to those for purchased vehicles apply.

Selling a 280F Vehicle

When you sell, trade, or otherwise dispose of a vehicle subject to Section 280F, gain or loss is sale price minus adjusted basis. Because the caps prevented you from deducting as much as you otherwise would have, adjusted basis is higher than on non-280F property. Higher basis means less taxable gain, or a larger deductible loss.

Any gain attributable to depreciation previously claimed is treated as ordinary income under the recapture rules, not capital gain. The disposition and any recapture are reported on Form 4797.⁶ If you already recaptured excess depreciation in a prior year because business use dropped below 50 percent, you subtract that amount so the same depreciation is not taxed twice.

Vehicles acquired through like-kind exchanges or other nonrecognition transactions carry over the original placed-in-service date. The caps that applied to the original vehicle continue to apply to the replacement.⁵

Recordkeeping: Vehicles Are Listed Property

The IRS treats passenger automobiles as listed property, which triggers stricter substantiation than most business assets. You must maintain records documenting the amount, time, place, and business purpose of every use of the vehicle.⁷ Vague summaries or after-the-fact estimates do not suffice.

In practice that means a mileage log, written or electronic, kept throughout the year. Odometer readings at the start and end of the year, date and destination of each business trip, miles driven, and business purpose. Mileage apps and GPS logs satisfy the rule when they capture these details contemporaneously.

Inadequate records mean complete disallowance of depreciation and Section 179 on the vehicle. Even a vehicle plainly used 100 percent for business will lose its deduction in an audit if there is no proper log.

The Standard Mileage Rate Alternative

If tracking actual vehicle expenses and living inside the 280F caps sounds burdensome, the IRS offers an alternative. For 2026, the business standard mileage rate is 72.5 cents per mile.⁸ You multiply business miles by the rate and deduct that amount instead of claiming depreciation, gas, insurance, and other actual expenses.

The rate has its own rules. You must use it in the first year the vehicle is available for business to preserve the option for later years. You cannot use it if you claimed Section 179 or bonus depreciation on the vehicle, and you cannot use it for a fleet of five or more vehicles operated simultaneously. For a modestly priced car or one with average annual mileage, the standard rate often produces a larger deduction than the 280F-capped actual expense method. You still need a mileage log.

State Conformity

Federal depreciation does not automatically flow through to your state return. Many states decouple from federal bonus depreciation, requiring an add-back on the state return and a slower deduction spread over later years. Conformity varies: some states follow federal rules exactly; others require a full add-back of bonus depreciation with a corresponding deduction over the following years. Section 179 may face a lower state-level cap. Where a state decouples, you will need a separate depreciation schedule for state purposes, and the timing mismatches persist for the full recovery period of the vehicle.

1
IRS. REV. PROC. 2026-15
2
Office of the Law Revision Counsel. 26 USC 280F – Limitation on Depreciation for Luxury Automobiles; Limitation Where Certain Property Used for Personal Purposes
3
IRS. 2025 Publication 946
4
IRS. Interim Guidance on Additional First Year Depreciation Deduction
5
Office of the Law Revision Counsel. 26 U.S. Code 280F – Limitation on Depreciation for Luxury Automobiles; Limitation Where Certain Property Used for Personal Purposes
6
IRS. 2025 Instructions for Form 4797 – Sales of Business Property
7
eCFR. 26 CFR 1.274-5 – Substantiation Requirements
8
IRS. 2026 Standard Mileage Rates