Dollar figures in this piece are for tax year 2026.
By the numbers
- 72.5 centsper business mile
- $20,200with bonus
- 50%for business to use accelerated depreciation
A business vehicle has two deduction systems, and you usually choose between them in the first year the vehicle is in business use. With the standard mileage rate, 2026 business miles are deductible at 72.5 cents each and nothing else on the car is. With actual expenses, you deduct the business share of the real costs plus depreciation.
Depreciation is where section 280F bites. A car rated at 6,000 pounds or less is capped at a fixed dollar amount per year, no matter what it cost. A heavier SUV is treated differently, and so is a vehicle used 50% or less for business.
Below: which limits apply to which vehicle, how to compute them, and what the records must show. For the broader mechanics, see the depreciation explainer and section 179 versus bonus depreciation.
Mileage rate or actual expenses
The standard mileage rate for 2026 is 72.5 cents a mile, up from 70 cents for 2025. It is meant to cover gas, oil, repairs, insurance, registration and depreciation. Use it for a year and you cannot also deduct those actual costs for that year. Parking fees and tolls for business trips come on top of the rate.
The timing rule is the one that traps people. For a car you own, you must choose the standard mileage rate in the first year the car is available for use in your business. In later years you can use either method. Start instead with a section 179 deduction, bonus depreciation, or any depreciation method other than straight line, and the mileage rate is closed to that car for good. You can switch from mileage to actual expenses later, but the car is then depreciated straight line over its remaining estimated life, not under the accelerated MACRS schedule.
You also cannot use the mileage rate if you use five or more cars at the same time, as in fleet operations. An employee generally cannot deduct unreimbursed vehicle costs at all, because the miscellaneous itemized deduction that once carried them is suspended. For a reimbursed employee, see the accountable plan rules.
The two methods side by side
Standard mileage rate
- What you deductBusiness miles times the rate (72.5 cents for 2026), plus business parking and tolls
- Depreciation, section 179, bonusNot separately allowed; depreciation is built into the rate
- When you must chooseFirst year the car is available for business use
- Five or more cars at onceNot allowed
- RecordsMileage log: miles, dates, purposes
Actual expenses
- What you deductBusiness share of gas, repairs, insurance, registration, lease payments and depreciation
- Depreciation, section 179, bonusAllowed, subject to the section 280F caps
- When you must chooseAny year if you did not use the mileage rate first
- Five or more cars at onceAllowed
- RecordsMileage log plus receipts for each cost
Rules that differ between the standard mileage rate and actual expenses, from Pub. 463.
See it as a table
| Point | Standard mileage rate | Actual expenses |
|---|---|---|
| What you deduct | Business miles times the rate (72.5 cents for 2026), plus business parking and tolls | Business share of gas, repairs, insurance, registration, lease payments and depreciation |
| Depreciation, section 179, bonus | Not separately allowed; depreciation is built into the rate | Allowed, subject to the section 280F caps |
| When you must choose | First year the car is available for business use | Any year if you did not use the mileage rate first |
| Five or more cars at once | Not allowed | Allowed |
| Records | Mileage log: miles, dates, purposes | Mileage log plus receipts for each cost |
What §280F actually limits
Section 280F caps the annual depreciation deduction on a "passenger automobile," defined as a four-wheeled vehicle made mainly for public roads and rated at 6,000 pounds or less. For a truck or van the test uses gross vehicle weight. For a car it uses unloaded weight. Section 179 expensing and bonus depreciation count as depreciation for the cap, so relabeling does not get you over it.
The statute lists base amounts of $10,000, $16,000, $9,600 and $5,760, but those are indexed for inflation, so the real numbers come from an IRS revenue procedure each year. For a passenger automobile placed in service in 2025, Pub. 463 shows $20,200 in the first year if bonus depreciation applies ($12,200 if it does not), $19,600 in the second year, $11,800 in the third, and $7,060 for each year after that. I could not confirm the table for vehicles placed in service in 2026 in the sources I work from. If you are buying this year, get the current-year table from the IRS before running numbers.
Use the car for business less than 100% of the time and the cap shrinks by the same percentage. The IRS example: $12,200 times 60% is $7,320. Disallowed amounts are not lost. Unrecovered basis becomes deductible after the recovery period ends, again within the later-year cap.
- Business share of cost
- First-year cap after business use
| Business share of cost | First-year cap after business use | |
|---|---|---|
| 100% business | $60,000 | $20,200 |
| 90% | $54,000 | $18,180 |
| 80% | $48,000 | $16,160 |
| 60% | $36,000 | $12,120 |
The cap, not the price, sets the deduction, and it scales down with business use.
Computed: $60,000 cost times business use, versus $20,200 first-year limit (Pub. 463) times business use; hypothetical inputs
Example, hypothetical: the same $60,000 vehicle two ways
Take a sole proprietor who buys a $60,000 sedan in 2025 and uses it 80% for business. The business share of the cost is $48,000. With 100% bonus depreciation, the uncapped first-year deduction would be $48,000. The first-year limit is $20,200 times 80%, or $16,160. In 2026, the second-year limit is $19,600 times 80%, or $15,680. The remaining basis is recovered later, within the caps.
Now a different purchase: an $80,000 SUV placed in service in 2026 with a gross vehicle weight rating above 6,000 pounds, used 90% for business. It is not a passenger automobile, so the 280F caps do not apply. The business share is $72,000. The section 179 deduction for such an SUV is limited to $32,000 for 2026, but bonus depreciation is not subject to that SUV cap. Pub. 463 describes bonus as 100% for qualified property, including cars, trucks and vans, acquired after January 19, 2025. On those facts the whole $72,000 can be a first-year deduction, subject to the other eligibility conditions for bonus.
For comparison, 15,000 business miles in 2026 at 72.5 cents is $10,875, and 25,000 miles is $18,125.
A vehicle rated above 6,000 pounds can sit outside the annual caps; the sedan cannot.
The 6,000-pound line and heavy SUVs
Everything above turns on the weight rating. A four-wheeled vehicle built to carry passengers, rated over 6,000 pounds and up to 14,000 pounds gross vehicle weight, is a "sport utility vehicle" for section 179 purposes, and its section 179 cost is capped ($32,000 for 2026, from Rev. Proc. 2025-32). The $32,000 cap does not apply to a vehicle that seats more than nine behind the driver, that has a cargo area of at least six feet not reachable from the passenger compartment, or that has a fully enclosed driver and load area with no rear seating.
A vehicle used directly in the business of transporting persons or property for pay or hire is outside the passenger automobile definition, as are a hearse and ambulances used in business. A truck or van also drops out if it is a qualified nonpersonal use vehicle. That means it was specially modified so it is not likely to be used more than a minimal amount for personal purposes, with permanent shelving, a sign-painted exterior and a single bench, for example.
The IRS says it that way. Here is what it means.
| What you read | What it means |
|---|---|
| A four-wheeled road vehicle rated 6,000 pounds or less, which is where the 280F caps apply | |
| Property, including passenger cars, that carries extra proof and business-use rules | |
| The car is ready and available for business use | |
| A first-year allowance, 100% for qualified property acquired after January 19, 2025 | |
| A first-year expensing election, made on your original return | |
| Excess depreciation added back to income when business use falls to 50% or less |
Listed property, the 50% test and recapture
A passenger automobile is "listed property," which brings two extra rules. The first is substantiation under section 274(d): no deduction unless you prove the amount, the time and place or date, and the business purpose, by adequate records or sufficient corroborating evidence. The second is the business-use test. If business use is not above 50%, you cannot use accelerated depreciation or section 179, and the vehicle is depreciated straight line over five years under the alternative depreciation system.
The test runs year by year. Suppose business use was above 50% in the year you placed the car in service and falls to 50% or below later. The "excess depreciation" is included in income in that later year, and depreciation after that follows straight line. A section 179 deduction can be recaptured the same way. Business use means miles driven for business divided by all miles, excluding commuting, and it excludes investment use. Commuting between home and a regular place of work is personal, however far it is.
Leases follow a parallel rule. For a lease of 30 days or more, only an "allowable percentage" of the payments is deductible, set by IRS tables so the result tracks the depreciation caps. A lessee using the mileage rate must keep using it for the whole lease.
Common mistakes
- Using accelerated depreciation or §179 on a vehicle whose business use is 50% or less, which the Code does not allow.
- Choosing a §179 deduction or bonus in year one, then assuming the mileage rate remains open for that car; it does not.
- Counting commuting miles, or miles driven to a regular office, as business miles.
- Reconstructing a mileage log in April; the IRS says records should be made at or near the time, and a weekly log counts.
- Forgetting to reduce the depreciation cap by the personal-use share of the vehicle.
- Assuming any "truck" avoids the caps: the exception needs a gross vehicle weight above 6,000 pounds or real nonpersonal-use modifications.
- Using the prior year's limits table for a vehicle placed in service this year.
The usual way versus doing it right
Buy first, sort it out later
- Pick the vehicle on price alone
- Rebuild a mileage log in April
- Take section 179 or bonus without checking what it does to mileage
Decide before you buy
- Check the weight rating first
- Start the log on day one
- Write down the first-year election before you file
What to do before and after you buy
Find the weight rating
Look at the manufacturer's gross vehicle weight rating for the exact vehicle before you decide. Over 6,000 pounds changes which limits apply.
Run both methods
Compute actual expenses with the correct cap and the mileage deduction at 72.5 cents. Pub. 463 suggests figuring both if you qualify for both.
Start the log on day one
Record date, miles, destination and purpose at least weekly, plus total odometer readings on January 1 and December 31.
Place it in service in the right year
A car counts as placed in service when it is ready and available for business use, not when you decide to use it.
Decide the first-year election in writing
Section 179 and bonus lock out the mileage rate for that car. The section 179 election is made on your original return, so write down the decision before you file.
Review the business-use percentage every December
A drop to 50% or less can trigger recapture.
