How To Depreciate Your Car on Your Taxes

We use our cars for everything: errands, school drop-offs, vet visits, and daily commutes, among many other things. Some of us are so reliant on our vehicles that we even give them nicknames and soothingly pat the dash when they make noises that indicate problems we can’t afford to repair.

Considering all the value they add to our daily lives, it shouldn’t be surprising that our vehicular companions help us save on taxes too! Believe it or not, you can use the amount your vehicle depreciates over time to reduce your tax bill.

What is vehicle depreciation?

Put simply, depreciation is a way to measure the declining value of an asset. We all intuitively understand this concept: a Ford Focus purchased in 2014 is less valuable than a Ford Focus purchased in 2020. (I would know. Thanks for nothing, CarMax.)

The reason for this decline is also apparent: the more a car is used, the more wear and tear it gets. That’s why a used car with low mileage is a great purchase (Who knew you’d get car buying tips here too!).

The other contributing factor is that humans continue to innovate. Every year new models of cars are released with improved functionality and features. In other words, the car you bought five years ago simply can’t compete.

What auto depreciation means for your taxes

The general idea behind car depreciation for taxes is to spread the cost of a car out over its “useful life,” instead of writing off its whole cost the year you buy it.

The term “useful life” refers to the amount of time it takes for your vehicle to lose 100% of its original value. For tax purposes, the IRS generally considers five years to be standard for most vehicles. (In other words, your car has the life expectancy of a guinea pig).

There are two basic methods to depreciate your vehicle for taxes: mileage and actual expenses.

If you use the standard mileage deduction

Most people are familiar with the term “business mileage.” If you’re not, it’s exactly what it sounds like: the number of miles you drove for work in a given year. This is a great option for people who drive a lot for work, such as truckers or Uber and Lyft drivers. It may also make sense for, say, Turo hosts whose cars get rented out a lot.

Every year the IRS posts a standard mileage rate that is intended to reflect all the costs associated with owning a vehicle: gas, repairs, oil, insurance, registration, and of course, depreciation.

For 2025, that rate is $0.70 (70 cents) per mile. For 2026, it's $0.725 (72.5 cents) for the first half of the year and $0.76 (76 cents) for the second half.

Calculating your standard mileage deduction

You can use these rates to calculate your tax deduction at the end of the year. For instance, let’s say you drove 12,000 miles in 2026, 5,000 of which were for work. Of those business miles, you drove 2,500 between January and June and 2,500 between July and December.

Your mileage write-off would be $3,712.50:

• $1,812.50 for the first half of the year (2,500 × $0.725), plus

• $1,900 for the second half of the year (2,500 × $0.76)

Don't count the miles you spend commuting

The only rule is that “business mileage” does not include commuting mileage, which is defined as the distance you drive from home to work.

If you have a home office as your exclusive place of business (meaning you don’t have a second primary office somewhere else), you’re eligible to include the mileage between your home office and other locations where you do business, such as clients’ offices.

If you use the actual expense method

This expense method allows you to claim your actual vehicle costs, such as gas, oil changes, repairs, insurance, and depreciation. The nice thing about this option is that it's easier to track during the year since you can include the expenses with your other write-offs. You'll still need to keep current notes supporting the business purpose of the trips you took.

Make sure you carefully consider which method is most advantageous to you. If you claim mileage your first year, you can switch to actual car expenses the next year. But if you choose the actual method the first year, you're locked in and can't switch to mileage later on.

This is on a per-auto basis. So in theory, you could have two vehicles and employ a different method for each one. The only rule is that you can’t alternate between methods on the same vehicle.

How much can you write off for car depreciation?

If you choose the mileage, you won’t be able to claim depreciation as a standalone deduction — it’s already included in the standard mileage rate. But if you use the actual expense method, the amount you can write off as depreciation is your “basis” in the vehicle.

Basis essentially means sunk cost. Let’s say you purchase a used car for $18,000, and after all the fees, taxes, and registration, the total price is $20,000. $20,000 is your basis in the vehicle (regardless of whether you need financing to make the purchase or not).

Before you rush to sign on the dotted line, however, you need to be aware that only the business portion of your basis is eligible to depreciate on your taxes.

Most of us don’t have vehicles that are strictly for business use, so we have to treat our autos as “listed” assets, meaning we have to carve out the amount that’s personal. The business portion is calculated the same way as mileage above: business miles / annual mileage = business use.

The basis is multiplied by our business-use percentage to determine the “depreciable basis” of the vehicle for tax purposes. In the example shown above, the depreciable basis on our $20,000 vehicle would be $11,400.

See how this would be allocated on your taxes in the table below:

This table assumes the auto was placed in service at the beginning of the first year. See IRS table A-2 for further details.

You may have wondered why the depreciation percentages were so large for the first couple of years. That’s because the vehicle is over 50% for business use, which means we’re able to use MACRS depreciation (which stands for Modified Accelerated Cost Recovery System). This allows you to front-load the bulk of the expense in the first two years.

If, alternatively, the business use on your vehicle is under 50%, you’re required to use the straight-line depreciation method (SLD) instead. SLD is easy to calculate because it simply takes the depreciable basis and divides it evenly across the useful life. So $11,400 ÷ 5 = $2,280 annually.

When it’s time to file your return, you’ll use Form 4562 to report your car’s depreciation.

Can you get a bigger write-off upfront?

Many people are surprised to learn they can’t deduct the entire cost of their vehicle when they buy it. In response, the IRS has developed ways to “accelerate” depreciation in order to allow a bigger write-off in the first year.

There are currently two methods to accelerate depreciation.

Accelerating depreciation with Section 179

The Section 179 deduction allows eligible business owners to deduct some or all of the cost of qualifying equipment in the year it's placed in service, rather than depreciating the cost over several years.

Section 179 can apply to business vehicles, but passenger automobiles are subject to annual depreciation limits. For passenger vehicles placed in service in 2026, the combined first-year limit on Section 179, bonus depreciation, and regular depreciation is generally $12,300 if bonus depreciation doesn't apply, or $20,300 if it does. Different limits and rules apply to certain heavy SUVs, trucks, and vans.

To claim Section 179 on a vehicle used for both business and personal purposes, you must use it more than 50% for business in the year you place it in service. Your eligible cost basis is reduced based on your business-use percentage.

Accelerating depreciation with bonus depreciation

Bonus depreciation lets business owners accelerate depreciation by claiming a larger portion of the cost of qualifying property in the year it's placed in service.

How much can you write off with bonus depreciation?

Under the One Big Beautiful Bill Act, 100% bonus depreciation was permanently restored for qualifying property acquired and placed in service after January 19, 2025. That means eligible business property can generally qualify for a bonus depreciation deduction equal to 100% of its depreciable basis in the year it's placed in service.

Cars can qualify for bonus depreciation, but passenger vehicles are subject to special depreciation limits. For a passenger vehicle placed in service in 2026, the maximum first-year depreciation deduction is generally $20,300 when bonus depreciation applies.

To claim bonus depreciation on a car, you must use the vehicle more than 50% for qualified business use. If your business use is 50% or less, you can't claim bonus depreciation and generally must depreciate the vehicle using the straight-line method instead.

Section 179 vs. bonus depreciation: What’s the difference?

Section 179 and bonus depreciation can both help you deduct the cost of qualifying business property faster, but they work differently.

Section 179 is an elective deduction: you choose how much of an eligible asset's cost to expense, subject to applicable limits.

Bonus depreciation generally applies automatically to qualifying property unless you elect out.

For qualifying property acquired and placed in service after January 19, 2025, bonus depreciation is generally 100%, meaning it can potentially allow you to deduct the property's entire depreciable basis in the first year. Section 179 can also provide a large first-year deduction, but it has its own annual dollar limits, phaseout rules, and taxable-income limitation.

For 2026, the overall Section 179 deduction limit is $2.56 million, with the deduction beginning to phase out when qualifying property placed in service exceeds $4.09 million.

Depreciation on SUVs, trucks, and other heavy vehicles

Up until now, we've mostly been discussing depreciation as it applies to passenger vehicles. The IRS generally imposes special annual depreciation limits on passenger automobiles, including trucks and vans with a GVWR of 6,000 pounds or less.

Heavier vehicles can be treated differently. Certain SUVs, pickup trucks, vans, and other vehicles with a GVWR above 6,000 pounds aren't subject to the same annual depreciation limits as passenger automobiles. As a result, qualifying heavy vehicles may be eligible for much larger first-year deductions through bonus depreciation and Section 179.

Under current law, qualifying property acquired and placed in service after January 19, 2025 may be eligible for 100% bonus depreciation. That means a qualifying heavy vehicle used 100% for business may potentially be fully depreciated in the year it's placed in service.

For example, if you purchase an $80,000 qualifying truck and use it exclusively for your business, you may be able to deduct the full $80,000 through bonus depreciation in the first year.

Section 179 has different rules.

Certain SUVs and similar vehicles with a GVWR above 6,000 pounds but no more than 14,000 pounds are subject to a special Section 179 deduction limit. However, some heavy vehicles, including certain pickups with cargo beds at least six feet long, qualifying cargo vans, and vehicles designed to carry more than nine passengers behind the driver, aren't subject to this special SUV limit.

You can usually find your vehicle's GVWR on the manufacturer's label inside the driver's-side door or door frame. Keep in mind that simply having a GVWR above 6,000 pounds doesn't automatically mean you can deduct the vehicle's entire purchase price. Business use matters, too! You generally must use it more than 50% for qualified business purposes.

Calculating car depreciation isn't the ideal way to spend an afternoon, but taking the time to consider your options can be worth every penny!