IRS issues higher 2026 depreciation limits for passenger automobiles

After issuing a decrease last year, the IRS on Tuesday posted slightly higher depreciation limitations for passenger automobiles. These limits are updated annually for inflation, based on the automobile component of the Chained Consumer Price Index for Urban Consumers.

Rev. Proc. 2026-15 contains the Sec. 280F(a) inflation-adjusted dollar limitations on depreciation deductions for passenger automobiles — which include trucks and vans — acquired after Sept. 27, 2017, and placed in service during 2026.

For passenger vehicles for which Sec. 168(k) additional first-year, or “bonus,” depreciation is applied, the limitation is $20,300 for the first tax year, an increase of $100 from the 2025 amount.

The succeeding-year limitations are $19,800 for the second tax year (an increase of $200 from 2025); $11,900 for the third year (an increase of $100); and $7,160 for each year after that (an increase of $100).

If bonus depreciation does not apply, the 2025 first-year limitation is $12,300 ($100 more than 2025), and the succeeding years’ limitations are the same as for vehicles eligible for bonus depreciation.

The revenue procedure also provides a table of the inflation-adjusted amounts for a lease term beginning in calendar year 2026 by which a deduction for a leased passenger automobile must be reduced under Sec. 280F(c)(2). This limitation is expressed as an inclusion in gross income, which is determined by applying a formula to a dollar amount. The dollar amounts for each tax year during a lease are correlated to the ranges of vehicles’ fair market value.

For the 12 months ending January 2026, the price of used cars and trucks dropped 2%, and the price of new cars rose by 0.4%, according to the Bureau of Labor Statistics. Neither percentage is seasonally adjusted.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.