IRS Auto Depreciation Limits 2026: New Caps for Business Vehicles

The IRS just published Rev. Proc. 2026-15 with updated depreciation caps for passenger automobiles placed in service in 2026. Tax practitioners need these numbers right now — it's busy season, clients are buying vehicles, and the first-year limit with bonus depreciation is $20,300 (up $100 from 2025).

Here's the breakdown every tax CPA needs to know.

2026 Depreciation Limits with Bonus Depreciation

If your client's passenger vehicle qualifies for Sec. 168(k) additional first-year "bonus" depreciation, here are the 2026 limits:

Year 1: $20,300 (up $100 from 2025)
Year 2: $19,800 (up $200 from 2025)
Year 3: $11,900 (up $100 from 2025)
Year 4 and beyond: $7,160 per year (up $100 from 2025)

Rev. Proc. 2026-15 applies to passenger automobiles — which include trucks and vans — acquired after Sept. 27, 2017, and placed in service during 2026.

2026 Depreciation Limits WITHOUT Bonus Depreciation

If bonus depreciation doesn't apply, the first-year limitation drops significantly:

Year 1: $12,300 (up $100 from 2025)

The succeeding-year limitations are the same as vehicles eligible for bonus depreciation:
Year 2: $19,800
Year 3: $11,900
Year 4 and beyond: $7,160 per year

The difference between bonus and non-bonus depreciation in Year 1 is $8,000 — that's a meaningful tax planning conversation with clients buying vehicles this year.

Updated Lease Inclusion Tables Released

Rev. Proc. 2026-15 also provides updated tables for the inflation-adjusted amounts 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, 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.

If your clients lease business vehicles, you need the updated tables to calculate the correct inclusion amount for 2026. The tables are available in the full Rev. Proc. 2026-15 publication on IRS.gov.

Why These Numbers Changed

The IRS updates these limits annually for inflation, based on the automobile component of the Chained Consumer Price Index for Urban Consumers.

For the 12 months ending January 2026, the Bureau of Labor Statistics reports:

• Used cars and trucks: down 2%

• New cars: up 0.4%

The modest increase in new car prices explains why the 2026 limits rose by only $100-$200 per category.

What Tax Practitioners Need to Do Right Now

If you're preparing 2025 returns for clients who bought vehicles last year, use the 2025 limits (which were lower). If clients are buying vehicles in 2026, use the new limits from Rev. Proc. 2026-15.

Here's the tax planning conversation to have with business clients:

Bonus depreciation makes a $8,000 difference in Year 1. If a client's vehicle qualifies for bonus depreciation, the first-year deduction is $20,300 vs. $12,300 without it. That's a significant tax benefit.

Trucks and vans qualify. The IRS defines "passenger automobiles" to include trucks and vans, so the limits apply broadly to most business vehicles.

Heavy vehicles (over 6,000 lbs) may have different rules. If your client is buying a heavy SUV or truck over 6,000 lbs gross vehicle weight, Sec. 179 expensing or different depreciation rules may apply.

Leased vehicles require inclusion tables. If your client leases a business vehicle, you must reduce their deduction using the updated lease inclusion tables.

This is one of those annual updates every tax CPA needs to know cold. Print it, save it, and reference it when clients ask about vehicle purchases this year.