Does the IRC 280F annual cap apply even if I elect 100% bonus depreciation under IRC 168(k)?

Yes. The IRC 280F(a) annual cap applies to passenger automobiles regardless of whether the taxpayer elects 100% bonus depreciation under IRC 168(k). A common practitioner error is assuming that electing bonus depreciation eliminates the per-vehicle cap. It does not. In Year 1, the total first-year depreciation on a passenger automobile (whether from regular MACRS, Section 179, or IRC 168(k) bonus) cannot exceed the applicable IRC 280F annual cap amount for that year. Any depreciation that would otherwise be allowable but exceeds the cap is not lost permanently -- it carries forward to future years, where it is allowed subject to the remaining annual cap amounts (Year 2, Year 3, Year 4+). Verify the current Year 1 cap amount in the applicable IRS Revenue Procedure at IRS.gov; amounts are updated annually.

What is 'listed property' under IRC 280F after the TCJA removed computers from the category?

Prior to the Tax Cuts and Jobs Act of 2017 (TCJA), computers and peripheral equipment were listed property under IRC 280F(d)(4), subject to the 50% qualified business use test and the annual depreciation caps. The TCJA removed computers from the listed property category for property placed in service after December 31, 2017. Under current law, listed property under IRC 280F(d)(4) includes: passenger automobiles; any other property used for transportation; property used for entertainment, recreation, or amusement; and any other property specified in regulations. Verify the current definition of listed property in IRC 280F(d)(4) and the applicable regulations at IRS.gov, particularly because OBBBA or subsequent guidance may have modified specific categories.

What happens if my client's business use of a vehicle falls below 50% in a later year?

If a vehicle's qualified business use percentage drops below 50% in any tax year after the year it was placed in service, the taxpayer faces mandatory ADS recapture under IRC 280F(b)(2). The taxpayer must (1) switch from MACRS to the alternative depreciation system (ADS) straight-line for the year in which use drops below 50% and for all future years, and (2) include in gross income as ordinary income the excess of the depreciation actually allowed or allowable in prior years over what would have been allowed under ADS straight-line for those same years. This recapture is reported on Form 4797. The recapture amount can be substantial if the taxpayer claimed MACRS accelerated depreciation or IRC 168(k) bonus depreciation (subject to the annual cap) in prior years. Cite IRC 280F(b)(2) and IRC 1245; verify the recapture mechanics at IRS.gov and review Form 4797 instructions.

How do I calculate the business-use percentage for a vehicle used partly for commuting?

Commuting miles are personal miles for federal income tax purposes -- they do not count as qualified business use under IRC 280F(d)(6). To calculate the business-use percentage for the year, divide the total business miles driven (excluding commuting and other personal miles) by the total miles driven for all purposes during the year. For example, if a vehicle is driven 20,000 total miles in a year, of which 12,000 are business miles (not commuting), 5,000 are commuting miles, and 3,000 are personal miles, the business-use percentage is 12,000 / 20,000 = 60%. If the business-use percentage falls at or above 50%, the taxpayer may use MACRS and IRC 168(k) bonus (subject to the annual cap). If it falls below 50%, the taxpayer must use ADS straight-line. The IRC 274(d) substantiation requirement mandates a contemporaneous written mileage record; verify the computation methodology in IRC 280F(d)(6), Reg. 1.274-6T, and IRS.gov.

Does the luxury automobile cap under IRC 280F apply to vehicles over 6,000 lbs. GVW?

No. The annual depreciation caps under IRC 280F(a) apply specifically to 'passenger automobiles,' which are defined in IRC 280F(d)(5) as any 4-wheeled vehicle manufactured primarily for use on public streets and rated at 6,000 lbs. unloaded gross vehicle weight (GVW) or less. Vehicles with a gross vehicle weight rating (GVWR) over 6,000 lbs. -- such as heavy SUVs, pickup trucks, and vans -- are not passenger automobiles under IRC 280F(d)(5) and are therefore not subject to the annual depreciation cap. However, IRC 179(b)(5) limits the Section 179 deduction for SUVs (generally vehicles with GVW over 6,000 lbs. but not more than 14,000 lbs.) to 25% of the vehicle's cost (up to an annually adjusted dollar cap; verify at IRS.gov). IRC 168(k) bonus depreciation is available for heavy vehicles meeting the 50% business-use test without the passenger automobile dollar cap. Cite IRC 280F(d)(5) and IRC 179(b)(5); verify current heavy vehicle rules at IRS.gov.

What is the leased vehicle inclusion amount and where do I report it?

Under IRC 280F(c), a taxpayer who leases a passenger automobile for business use cannot circumvent the annual cap simply by leasing rather than purchasing. The lessee must include in gross income an IRS-determined 'inclusion amount' for each year of the lease. The inclusion amount is based on the fair market value of the vehicle and the year of the lease (first lease year, second lease year, etc.). It is added to the lessee's gross income and effectively reduces the net deduction benefit to an amount approximately equivalent to what the taxpayer would have received had the vehicle been purchased and subjected to the IRC 280F annual cap. The IRS publishes the inclusion amounts in an annual Revenue Procedure (verify the current-year amounts at IRS.gov). The inclusion amount is reported as income on the taxpayer's return; the lease payment deduction is taken on Schedule C or the applicable business return. Practitioners should confirm reporting instructions in the Form 4562 instructions and the applicable Rev. Proc.

How does OBBBA change the IRC 280F cap amounts for vehicles placed in service in 2025 and later?

The One Big Beautiful Budget Act (OBBBA), enacted July 4, 2025, raised the IRC 280F(a)(1)(B) first-year additional depreciation allowance for passenger automobiles. For vehicles placed in service in tax years beginning after the OBBBA effective date, the first-year cap is materially higher than the pre-OBBBA TCJA amount. This means a practitioner who applies pre-OBBBA cap amounts to a vehicle purchased in 2025 or 2026 will understate the allowable first-year deduction. The precise post-OBBBA Year 1 cap amount is published in the applicable IRS Revenue Procedure; verify the current cap at IRS.gov before advising any client on a post-OBBBA vehicle purchase. All cap amounts (Year 1 through Year 4+) are updated annually by Rev. Proc. and must be confirmed at IRS.gov for the specific tax year in which the vehicle is placed in service.

IRC 280F Listed Property Luxury Vehicle Cap

Rev. Proc. Amounts and OBBBA Figures Must Be Verified at IRS.gov Before Any Client Advice

The IRC 280F annual cap amounts for each depreciation year (Year 1 through Year 4+) and the leased vehicle inclusion amounts are updated each year by IRS Revenue Procedure. OBBBA (enacted July 4, 2025) raised the first-year IRC 280F(a)(1)(B) additional depreciation allowance for passenger automobiles placed in service in tax years beginning after the OBBBA effective date. This guide describes the statutory framework and identifies where each figure appears; it does not reproduce dollar amounts as binding authority. Confirm the current-year cap amounts in the applicable Rev. Proc. on IRS.gov before advising any client. Applying an outdated figure -- whether a pre-OBBBA TCJA amount or a prior year's Rev. Proc. -- may understate or overstate the allowable deduction.

All statutory references, regulatory citations, and IRS guidance cited in this guide must be independently verified against the current text of IRC 280F, the applicable Rev. Proc., current IRS.gov guidance, and current state law before reliance in any specific client matter. This guide is for informational purposes only and does not constitute legal or tax advice.

OBBBA Update -- Post-OBBBA First-Year Cap for Passenger Automobiles

For passenger automobiles placed in service in tax years beginning after the OBBBA effective date, the first-year IRC 280F cap is materially higher than the pre-OBBBA TCJA amount. Practitioners advising on 2025 and 2026 vehicle purchases must apply the new, post-OBBBA cap; applying the old pre-OBBBA amount understates the allowable first-year deduction. The post-OBBBA Year 1 cap amount is published in the applicable IRS Revenue Procedure. Confirm the current cap at IRS.gov before filing or advising. The Year 2, Year 3, and Year 4+ cap amounts are also subject to annual Rev. Proc. updates and must be confirmed separately for the applicable tax year.

IRC 280F is the provision that limits depreciation deductions on passenger automobiles and other listed property used in a trade or business. Every CPA, EA, and tax preparer who has clients with business vehicles must understand this section: it caps the annual depreciation deduction regardless of which depreciation method the taxpayer elects, it conditions MACRS and bonus depreciation access on a 50% qualified business use threshold, it imposes an ADS recapture obligation when use drops below that threshold in a later year, and it extends a parallel set of rules to taxpayers who lease rather than purchase. OBBBA raised the first-year cap for post-OBBBA vehicles, making the correct figure more important than ever to identify and apply. This guide works through each component in practitioner sequence.

Section 1: IRC 280F(a) -- The Luxury Automobile Annual Cap

What the Cap Does

IRC 280F(a) limits the total annual depreciation deduction that a taxpayer may claim on a "passenger automobile" (defined in Section 4 below) used in a trade or business. The cap applies to the combined total of all depreciation from all sources: regular MACRS deductions, Section 179 expensing elections, and IRC 168(k) bonus depreciation. No matter how much depreciation the property would otherwise generate, the Year 1 deduction is capped at the applicable first-year dollar limit for that tax year, the Year 2 deduction is capped at the applicable Year 2 limit, and so on. Cite IRC 280F(a) and the applicable Rev. Proc.

The dollar amounts of those annual caps are not fixed in the statute. The statute establishes the framework; the IRS updates the specific dollar figures each year by Revenue Procedure to account for inflation adjustments and any legislative changes (including, most recently, OBBBA). Practitioners must obtain the applicable Rev. Proc. for the tax year in which the vehicle is placed in service. Applying a prior year's Rev. Proc. amounts without confirmation is a source of error that can understate or overstate the allowable deduction.

Warning: The IRC 280F Annual Cap Applies Even When IRC 168(k) Bonus Depreciation Is Elected

Many practitioners assume that electing 100% bonus depreciation under IRC 168(k) eliminates the IRC 280F annual cap for passenger automobiles. It does not. The Year 1 cap under IRC 280F(a) limits total first-year depreciation on a passenger automobile regardless of any bonus depreciation election. A taxpayer who places a passenger automobile in service, claims 100% IRC 168(k) bonus, and would otherwise deduct the full vehicle cost in Year 1 is still limited to the applicable IRC 280F Year 1 cap amount for that tax year.

Depreciation that would otherwise be allowable but exceeds the annual cap is not permanently disallowed. The excess carries forward to future years, where it is allowed only to the extent it does not exceed the remaining annual cap amounts (Year 2, Year 3, Year 4+). Because the carryforward is absorbed at the same low annual cap rates, it can take many years to fully recover the basis of a high-cost vehicle. Cite IRC 280F(a); verify the applicable cap amounts in the current Rev. Proc. at IRS.gov.

The Year-by-Year Cap Structure

IRC 280F applies annual caps across four depreciation periods. The Year 1 cap is the highest; the cap then steps down for Years 2 and 3, and settles at a lower Year 4+ amount for all subsequent years until the vehicle's basis is fully depreciated. The table below shows the structure; confirm the specific dollar amounts for the applicable tax year in the current Rev. Proc. at IRS.gov. Do not use amounts from a prior year or from pre-OBBBA guidance without verification.

Depreciation Year	Applicable Cap Period	Pre-OBBBA TCJA Amount	Post-OBBBA Amount	Source
Year 1 (placed-in-service year)	IRC 280F(a)(1)(A)(i) and (B)	See applicable pre-OBBBA Rev. Proc. at IRS.gov	Materially higher; confirm in current Rev. Proc. at IRS.gov	Current IRS Rev. Proc.; IRS.gov
Year 2	IRC 280F(a)(1)(A)(ii)	See applicable Rev. Proc. at IRS.gov	Confirm in current Rev. Proc. at IRS.gov	Current IRS Rev. Proc.; IRS.gov
Year 3	IRC 280F(a)(1)(A)(iii)	See applicable Rev. Proc. at IRS.gov	Confirm in current Rev. Proc. at IRS.gov	Current IRS Rev. Proc.; IRS.gov
Year 4 and each year thereafter	IRC 280F(a)(1)(A)(iv)	See applicable Rev. Proc. at IRS.gov	Confirm in current Rev. Proc. at IRS.gov	Current IRS Rev. Proc.; IRS.gov
All amounts are IRS-published figures subject to annual inflation adjustment and legislative change. Verify in the applicable Rev. Proc. at IRS.gov before advising any client. OBBBA raised the Year 1 cap for vehicles placed in service in tax years beginning after the OBBBA effective date.

Business-Use Proration

When a vehicle is used partly for business and partly for personal purposes, the annual cap is prorated by the taxpayer's qualified business use percentage. A vehicle used 70% for business has an effective annual cap of 70% of the IRC 280F dollar limit for that year. A vehicle used 100% for business gets the full cap amount. The business-use percentage is calculated and reported on Form 4562, Part V, and must be substantiated under IRC 274(d). Cite IRC 280F(a)(2) for the proration rule.

Section 2: IRC 280F(b) -- The 50% Qualified Business Use Test

What the 50% Test Governs

IRC 280F(b) conditions access to MACRS accelerated depreciation and IRC 168(k) bonus depreciation on a minimum level of qualified business use. If a passenger automobile or other listed property is used more than 50% in a qualified business use during the tax year, the taxpayer may use MACRS and elect IRC 168(k) bonus depreciation (subject to the annual cap). If the vehicle's qualified business use is 50% or less in any year, the taxpayer is required to use the alternative depreciation system (ADS) straight-line method instead. ADS produces lower deductions over a longer recovery period than MACRS, and IRC 168(k) bonus depreciation is not available for ADS-required property. Cite IRC 280F(b)(1) and IRC 168(g).

"Qualified business use" for IRC 280F(b) purposes generally means use in a trade or business under IRC 162. Investment use (holding property for production of income under IRC 212) does not count as qualified business use for the 50% threshold test, even though it counts as business use for purposes of computing the depreciable percentage. Commuting between home and a regular work location is personal use, not qualified business use. Cite IRC 280F(d)(6) for the definition of qualified business use.

Consequence of Failing the 50% Test at Placement

If the vehicle's qualified business use is 50% or less in the year it is placed in service, the taxpayer must use ADS straight-line depreciation from Year 1. MACRS is not available. IRC 168(k) bonus depreciation is not available. The ADS recovery period for passenger automobiles is 5 years. The taxpayer still computes depreciation only on the business-use portion of the vehicle's cost, and the IRC 280F annual cap still applies (prorated by the business-use percentage). The effect is a significantly smaller annual deduction compared to a vehicle that qualifies for MACRS and IRC 168(k).

Warning: ADS Recapture When Business Use Drops Below 50% in a Later Year

If a vehicle's qualified business use percentage falls below 50% in any tax year after the year it was placed in service, the taxpayer faces mandatory recapture under IRC 280F(b)(2). The taxpayer must: (1) switch from MACRS to ADS straight-line for the year in which use drops below 50% and for all future years; and (2) include in gross income as ordinary income the amount by which depreciation actually allowed or allowable under MACRS (and IRC 168(k) bonus, subject to the annual cap) in all prior years exceeds what would have been allowed under ADS straight-line for those same years.

This recapture is not optional. It is mandatory and applies in the year business use first drops below 50%, regardless of whether the drop was voluntary (e.g., the client stopped using the vehicle for business) or involuntary. The recapture amount can be substantial if the taxpayer claimed MACRS accelerated depreciation or IRC 168(k) bonus depreciation (at the annual cap) in prior years. The recapture is reported as ordinary income on Form 4797 and is subject to IRC 1245. Cite IRC 280F(b)(2) and IRC 1245; verify the recapture computation and Form 4797 reporting in the Form 4797 instructions and IRS.gov.

Substantiation Requirement: The Contemporaneous Log Is Not Optional

IRC 274(d) imposes a strict substantiation requirement on all listed property, including vehicles. The taxpayer must maintain a contemporaneous written record that documents, for each business use: the amount of the use (miles), the date of the use, the business destination or location, and the business purpose. "Contemporaneous" means the record is made at or near the time of the use -- not reconstructed from memory days, weeks, or months later.

The IRS routinely disallows IRC 280F deductions on audit when the taxpayer cannot produce contemporaneous records. A reconstruction of a mileage log from calendar entries, receipts, or memory after the IRS has opened an examination is not a substitute for a contemporaneous record under IRC 274(d). Practitioners should advise every client with a business vehicle to begin keeping a contemporaneous mileage log on the first day the vehicle is used for business, and to keep the log throughout the vehicle's depreciable life. Cite IRC 274(d) and Treas. Reg. 1.274-5T.

Section 3: IRC 280F(d)(4) -- The "Listed Property" Definition

Categories of Listed Property Under Current Law

IRC 280F(d)(4) defines "listed property" -- the category of assets subject to the 50% business use test and (for passenger automobiles) the annual cap. Under current law, listed property includes:

Passenger automobiles. Any 4-wheeled vehicle manufactured primarily for use on public streets, rated at 6,000 lbs. unloaded gross vehicle weight or less. See Section 4 for the full definition and the 6,000 lb. GVW distinction. Cite IRC 280F(d)(5).
Other transportation property. Any property used for transportation that is not a passenger automobile. This category is subject to the 50% business use test but is not subject to the IRC 280F(a) annual dollar cap (that cap applies only to passenger automobiles). Cite IRC 280F(d)(4)(A)(ii).
Entertainment, recreation, and amusement property. Property used for entertainment, recreation, or amusement -- such as boats, airplanes used primarily for personal travel, and recreational vehicles. Subject to the 50% business use test. Cite IRC 280F(d)(4)(A)(iii) and Treas. Reg. 1.280F-6(b)(2).
Any other property specified by regulations. The Treasury retains authority to designate additional property as listed property. Verify the current list at IRS.gov and in the applicable regulations.

Computers: Removed from Listed Property After TCJA

Prior to the TCJA (Tax Cuts and Jobs Act of 2017), computers and peripheral equipment were listed property under IRC 280F(d)(4). The TCJA removed computers and peripheral equipment from the listed property category effective for property placed in service after December 31, 2017. A computer placed in service after that date is no longer subject to the 50% business use test or the IRC 280F annual cap as listed property. It remains subject to the normal MACRS and IRC 168(k) rules for personal property. Cite IRC 280F(d)(4) as amended by TCJA; hedge the current computer treatment to IRC 280F(d)(4) and IRS.gov, as subsequent legislation (including OBBBA) may have modified or further clarified this rule.

The Heavy Vehicle and the 6,000 lb. GVW Line

The IRC 280F(a) annual cap applies only to "passenger automobiles," defined in IRC 280F(d)(5) as 4-wheeled vehicles rated at 6,000 lbs. unloaded GVW or less. Vehicles with a GVW rating above 6,000 lbs. -- including many full-size SUVs, pickup trucks, and cargo vans -- fall outside the IRC 280F(a) passenger automobile cap entirely. They are still listed property under IRC 280F(d)(4)(A)(ii) as "other transportation property" and remain subject to the 50% qualified business use test. But the IRC 280F(a) annual depreciation cap does not apply to them.

The limitation on heavy SUVs is the IRC 179(b)(5) ceiling, not the IRC 280F(a) cap. IRC 179(b)(5) limits the IRC 179 expensing deduction for any sport utility vehicle (generally a vehicle with a GVW over 6,000 lbs. but not more than 14,000 lbs. with seating for fewer than certain passengers) to 25% of the vehicle's cost, up to an annually adjusted dollar cap. Confirm the current IRC 179(b)(5) dollar limit in the applicable Rev. Proc. at IRS.gov. IRC 168(k) bonus depreciation remains available for heavy vehicles without an IRC 280F-style dollar cap, subject to the 50% qualified business use test.

The Heavy SUV "Loophole" Has Its Own Limit: IRC 179(b)(5)

Vehicles with a GVW over 6,000 lbs. are not subject to the IRC 280F(a) annual cap on passenger automobiles. Practitioners sometimes characterize this as an unlimited deduction opportunity. It is not. IRC 179(b)(5) limits the Section 179 expensing deduction for an SUV to 25% of the vehicle's cost, up to a dollar ceiling that is updated annually by Rev. Proc. (verify the current cap at IRS.gov). This IRC 179 SUV ceiling applies even though the vehicle is not a passenger automobile under IRC 280F(d)(5).

IRC 168(k) bonus depreciation is available for qualifying heavy vehicles without a per-vehicle dollar cap analogous to IRC 280F(a), subject to the 50% business use test. However, the amount deducted under IRC 168(k) is limited to the vehicle's adjusted basis after any IRC 179 election. Practitioners should model the combined IRC 179 plus IRC 168(k) outcome and confirm both the IRC 179(b)(5) ceiling and the current IRC 168(k) rules at IRS.gov before advising clients on heavy vehicle purchases. Cite IRC 179(b)(5) and IRC 168(k).

Section 4: IRC 280F(c) -- Leased Vehicle Inclusion Amounts

Why the Inclusion Amount Rule Exists

A taxpayer who purchases a passenger automobile is subject to the IRC 280F(a) annual cap on depreciation deductions. Without a corresponding rule for lessees, a taxpayer could circumvent the annual cap simply by leasing the vehicle instead of purchasing it: the lessee would deduct the full lease payment each year as a business expense (subject to the business-use percentage), with no annual dollar cap analogous to IRC 280F(a). IRC 280F(c) prevents this result by requiring lessees to include an IRS-determined "inclusion amount" in gross income each year of the lease. The inclusion amount effectively reduces the net lease payment deduction to an amount approximately equivalent to the deduction a purchaser would receive subject to the IRC 280F annual cap.

How the Inclusion Amount Works

The inclusion amount is determined by reference to the fair market value of the leased vehicle and the lease year (first lease year, second lease year, etc.). The IRS publishes a table of inclusion amounts for each vehicle value range and lease year in an annual Revenue Procedure. The lessee: (1) identifies the vehicle's fair market value at the beginning of the lease, (2) locates the applicable dollar amount from the IRS table for that fair market value and lease year, (3) prorates that amount by the business-use percentage and the number of days the vehicle was leased during the year, and (4) includes the resulting amount in gross income. That included amount reduces the taxpayer's effective lease deduction below the nominal lease payment, achieving a result economically comparable to the cap on depreciation deductions for purchased vehicles.

The inclusion amount applies only to passenger automobiles subject to the IRC 280F(a) cap -- that is, vehicles with a GVW of 6,000 lbs. or less. Leases of heavy vehicles over 6,000 lbs. GVW are generally not subject to the inclusion amount rule because those vehicles are not subject to the IRC 280F(a) passenger automobile cap. Confirm the applicable inclusion amount table in the current Rev. Proc. at IRS.gov for the specific vehicle and tax year.

Form 4562 and Reporting

The inclusion amount for a leased vehicle is not reported on Form 4562. Instead, it is reported as "other income" on the taxpayer's return (Schedule C line 6, or the applicable other income line on the business return). The lease payment deduction (prorated by business use) is deducted separately as a lease expense. Practitioners should review the Form 4562 instructions and the applicable Rev. Proc. for the specific reporting line and computation methodology. Cite IRC 280F(c) and the applicable Rev. Proc.; hedge all inclusion amount mechanics to IRS.gov.

Section 5: Form 4562, Part V -- Reporting Listed Property

Part V: The Listed Property Section

Form 4562, Depreciation and Amortization, Part V is the dedicated reporting section for listed property. For each vehicle or other listed property item, the taxpayer must report: (1) the type of property; (2) the date placed in service; (3) the business/investment use percentage; (4) the cost or other basis; (5) the elected Section 179 deduction (if any); (6) the recovery period; (7) the depreciation method; and (8) the depreciation deduction for the year (limited by the IRC 280F annual cap and the business-use percentage). Part V must be completed for every listed property item on the return, regardless of the depreciation method used. Cite the Form 4562 instructions at IRS.gov.

Part V also requires disclosure of whether the vehicle meets one of three conditions for the business-use percentage claimed: (i) the employer provided the vehicle and prohibited personal use; (ii) the employer provided the vehicle, reported the value of personal use as wages, and the employee substantiated business use per IRC 274(d); or (iii) the taxpayer has written evidence supporting the business-use percentage. The condition checked in Part V is the practitioner's representation about the substantiation method; the underlying records must be maintained by the taxpayer.

The Business-Use Election and Annual Reporting Requirement

The business-use percentage for a vehicle is not a one-time election. It must be computed and reported on Form 4562, Part V for each tax year the vehicle is in service, until the vehicle is fully depreciated, disposed of, or its use changes. A drop in the business-use percentage below 50% in any year -- even years after the vehicle has been in service for several years -- triggers the ADS recapture rule under IRC 280F(b)(2) described in Section 2 of this guide. Practitioners should build a review of vehicle business-use percentages into the annual return preparation process for every client with a vehicle on Form 4562.

Practitioner Protocol: Form 4562 Part V Annual Checklist

Obtain client's contemporaneous mileage log for the year before completing Part V.
Compute business-use percentage from the log (total business miles / total miles; exclude commuting from numerator and denominator as personal miles).
If business use is above 50%: apply MACRS and confirm the applicable IRC 280F annual cap from the current Rev. Proc. at IRS.gov.
If business use is at or below 50%: apply ADS straight-line. If the vehicle was previously on MACRS, compute and report ADS recapture on Form 4797.
Confirm the OBBBA first-year cap applies to vehicles placed in service in tax years beginning after the OBBBA effective date.
For leased vehicles: compute the inclusion amount from the current Rev. Proc. table; report as gross income on the applicable line (not on Form 4562).
Retain mileage log and all substantiation in the client file.

Section 6: Passenger Auto vs. Heavy Vehicle -- Side-by-Side Comparison

The table below compares treatment across ten key dimensions. Confirm all figures and rules in the applicable statute and current Rev. Proc. at IRS.gov before advising any client.

Dimension	Passenger Auto Under 6,000 lbs.	Heavy SUV/Truck (Over 6,000 lbs.)
IRC 280F annual cap applies?	Yes. IRC 280F(a) caps total annual depreciation (MACRS + Section 179 + IRC 168(k)) at the Year 1, Year 2, Year 3, and Year 4+ amounts per the applicable Rev. Proc. Verify amounts at IRS.gov.	No. IRC 280F(a) does not apply to vehicles with GVW over 6,000 lbs. The IRC 280F(d)(5) "passenger automobile" definition excludes them. Cite IRC 280F(d)(5).
IRC 168(k) bonus available?	Yes, but subject to the IRC 280F annual cap. Electing 100% IRC 168(k) bonus does not override the cap; excess carries to future years at remaining cap rates. Cite IRC 280F(a) and IRC 168(k).	Yes, without a per-vehicle dollar cap analogous to IRC 280F(a). Subject to the 50% business-use test. IRC 168(k) applies to the adjusted basis after any IRC 179 election. Cite IRC 168(k).
IRC 179 election available?	Yes, but the IRC 179 deduction is included in the IRC 280F annual cap calculation. The cap limits the combined deduction. Cite IRC 179 and IRC 280F(a).	Yes, but IRC 179(b)(5) limits the IRC 179 deduction for SUVs to 25% of cost, up to an annually adjusted dollar ceiling. Verify the current ceiling in the applicable Rev. Proc. at IRS.gov. Cite IRC 179(b)(5).
IRC 179 passenger auto ceiling?	Effectively subsumed within the IRC 280F(a) annual cap. The combined Section 179 plus other depreciation cannot exceed the annual cap amount. Cite IRC 280F(a).	The IRC 179(b)(5) SUV ceiling (25% of cost, up to the annual Rev. Proc. limit) is the applicable constraint. Confirm the current amount at IRS.gov. Cite IRC 179(b)(5).
Business use threshold for MACRS	More than 50% qualified business use required for MACRS and IRC 168(k). At or below 50%, ADS straight-line is mandatory. Cite IRC 280F(b)(1).	More than 50% qualified business use required for MACRS and IRC 168(k), because heavy vehicles are still listed property (other transportation property) subject to IRC 280F(b). Cite IRC 280F(b)(1).
Consequence of dropping below threshold	Mandatory switch to ADS straight-line; ADS recapture of excess accelerated depreciation from prior years included in gross income as ordinary income in the year use drops below 50%. Cite IRC 280F(b)(2) and IRC 1245.	Same. ADS recapture applies to heavy vehicles as listed property when business use drops below 50%. Cite IRC 280F(b)(2) and IRC 1245.
ADS recapture rule	ADS recapture computed as the excess of MACRS plus IRC 168(k) depreciation (at applicable annual cap) over ADS straight-line for all prior years. Reported on Form 4797. Cite IRC 280F(b)(2) and IRC 1245.	Same ADS recapture rule applies. Reported on Form 4797. Cite IRC 280F(b)(2) and IRC 1245.
Leased vehicle inclusion amount?	Yes. IRC 280F(c) requires the lessee to include an IRS-determined amount in gross income each lease year. Inclusion amounts are published by Rev. Proc. at IRS.gov. Cite IRC 280F(c).	Generally no. The IRC 280F(c) inclusion amount applies only to passenger automobiles subject to the IRC 280F(a) cap. Heavy vehicles over 6,000 lbs. GVW are not subject to the inclusion amount regime. Confirm at IRS.gov.
Form 4562 Part for reporting	Part V (Listed Property). Business-use percentage, depreciation method, and annual cap compliance all reported in Part V. Cite Form 4562 instructions at IRS.gov.	Part V (Listed Property) as other transportation property. Same business-use percentage and substantiation requirements. Cite Form 4562 instructions at IRS.gov.
OBBBA impact on depreciation	OBBBA raised the IRC 280F(a)(1)(B) first-year additional depreciation allowance (Year 1 cap) for vehicles placed in service in tax years beginning after the OBBBA effective date. Verify the new cap in the current Rev. Proc. at IRS.gov. Applying a pre-OBBBA amount understates the deduction.	OBBBA's permanent restoration of 100% IRC 168(k) bonus depreciation applies to heavy vehicles (as qualified property). There is no IRC 280F(a) cap to raise for heavy vehicles. Verify IRC 168(k) OBBBA mechanics and effective dates at IRS.gov. Cite IRC 168(k) as amended by OBBBA.

Section 7: OBBBA and the IRC 280F Cap -- What Changed for Post-2025 Vehicles

The Pre-OBBBA TCJA First-Year Cap

Prior to OBBBA, the IRC 280F(a)(1)(B) additional first-year depreciation allowance -- the amount added to the base Year 1 cap to reflect the availability of bonus depreciation -- was set at a specific dollar amount established under the TCJA-era Revenue Procedures. That TCJA-era Year 1 cap was significantly lower than what OBBBA established. Practitioners who advised clients on vehicles placed in service before the OBBBA effective date applied those pre-OBBBA amounts; those amounts remain correct for vehicles placed in service before that date. Do not apply post-OBBBA amounts to pre-OBBBA vehicles, and do not apply pre-OBBBA amounts to post-OBBBA vehicles.

The Post-OBBBA First-Year Cap

For passenger automobiles placed in service in tax years beginning after the OBBBA effective date (July 4, 2025), OBBBA raised the IRC 280F(a)(1)(B) additional first-year depreciation allowance. The post-OBBBA first-year cap is materially higher than the TCJA-era amount. The precise post-OBBBA dollar amount is published in the applicable IRS Revenue Procedure; it must be confirmed at IRS.gov before filing or advising. The Year 2, Year 3, and Year 4+ cap amounts are separately published and may differ from both the pre-OBBBA and post-OBBBA Year 1 figures; confirm all years in the current Rev. Proc.

Note that even the higher post-OBBBA Year 1 cap is still a ceiling, not an elimination of the cap. The cap continues to apply. A vehicle placed in service after the OBBBA effective date that would otherwise generate a first-year deduction well above the cap (because of 100% IRC 168(k) bonus on a high-cost vehicle) is still limited to the applicable post-OBBBA Year 1 cap amount. The excess carries forward to future years subject to the Year 2, Year 3, and Year 4+ cap amounts from the same Rev. Proc.

Distinguishing Pre-OBBBA and Post-OBBBA Vehicles on the Same Return

A client who owns two vehicles -- one placed in service before the OBBBA effective date and one placed in service after -- will have two different applicable Year 1 cap amounts on the same Form 4562. The pre-OBBBA vehicle uses the cap from the Rev. Proc. applicable to the year it was placed in service; the post-OBBBA vehicle uses the post-OBBBA cap from the Rev. Proc. applicable to the year it was placed in service. Practitioners must track the placed-in-service date for each vehicle and apply the correct Rev. Proc. year for each. Do not average the cap amounts or apply a single Rev. Proc. to both vehicles without confirming each vehicle's placed-in-service year and the applicable Rev. Proc.

Practitioner Protocol: Identifying the Correct Rev. Proc. for Each Vehicle

Confirm the vehicle's placed-in-service date from purchase documentation or title transfer records.
Identify whether the vehicle was placed in service before or after the OBBBA effective date (July 4, 2025) and whether it was in a tax year beginning before or after that date.
Locate the applicable Rev. Proc. for that tax year at IRS.gov under "Revenue Procedures" or by searching the vehicle topic.
Confirm the Year 1, Year 2, Year 3, and Year 4+ cap amounts from that Rev. Proc. for both passenger automobiles (with and without IRC 168(k) bonus) as applicable.
Carry forward any unused prior-year cap amounts from earlier returns at the cap rates from the Rev. Proc. applicable to the year the vehicle was placed in service.
Document the Rev. Proc. relied upon in the workpapers for each vehicle on Form 4562.

Frequently Asked Questions: IRC 280F Listed Property and Vehicle Depreciation

Does the IRC 280F annual cap apply even if I elect 100% bonus depreciation under IRC 168(k)?

Yes. The IRC 280F(a) annual cap applies to passenger automobiles regardless of whether the taxpayer elects 100% bonus depreciation under IRC 168(k). A common practitioner error is assuming that electing bonus depreciation eliminates the per-vehicle cap. It does not. In Year 1, the total first-year depreciation (whether from regular MACRS, Section 179, or IRC 168(k) bonus) cannot exceed the applicable IRC 280F annual cap for that year. Any depreciation that would otherwise be allowable but exceeds the cap is not lost -- it carries forward to future years, where it is allowed subject to the remaining annual cap amounts. Verify the current Year 1 cap in the applicable Rev. Proc. at IRS.gov; amounts are updated annually and OBBBA raised the post-OBBBA Year 1 cap materially.
What is "listed property" under IRC 280F after the TCJA removed computers from the category?

Under current law following the TCJA's 2017 amendment, listed property under IRC 280F(d)(4) includes: passenger automobiles, other transportation property, property used for entertainment or recreation, and any property designated by regulation. The TCJA removed computers and peripheral equipment from listed property for property placed in service after December 31, 2017. A computer placed in service after that date is no longer subject to the 50% business-use test or the IRC 280F annual cap as listed property. Verify the current definition in IRC 280F(d)(4) at IRS.gov; OBBBA or subsequent guidance may have modified specific categories.
What happens if my client's business use of a vehicle falls below 50% in a later year?

Mandatory ADS recapture under IRC 280F(b)(2) applies. The taxpayer must: (1) switch from MACRS to ADS straight-line for the year in which use drops below 50% and all future years; and (2) include in gross income as ordinary income the excess of MACRS depreciation (plus IRC 168(k) bonus, subject to the annual cap) actually allowed or allowable in all prior years over what would have been allowed under ADS straight-line for those same years. This recapture is reported on Form 4797 and is subject to IRC 1245 ordinary income treatment. The recapture can be substantial if high accelerated depreciation was claimed in prior years. Cite IRC 280F(b)(2) and IRC 1245; verify the recapture computation at IRS.gov.
How do I calculate the business-use percentage for a vehicle used partly for commuting?

Commuting miles are personal miles and do not count as qualified business use under IRC 280F(d)(6). Divide total business miles (excluding commuting and other personal miles) by total miles driven for all purposes during the year. For example, if a vehicle is driven 20,000 total miles -- 12,000 business, 5,000 commuting, and 3,000 personal -- the business-use percentage is 12,000 / 20,000 = 60%. A percentage above 50% permits MACRS and IRC 168(k); at or below 50% requires ADS straight-line. All miles must be substantiated by a contemporaneous log under IRC 274(d). Cite IRC 280F(d)(6) and Treas. Reg. 1.274-5T for the full methodology and substantiation requirements.
Does the luxury automobile cap under IRC 280F apply to vehicles over 6,000 lbs. GVW?

No. The IRC 280F(a) annual cap applies only to "passenger automobiles," defined in IRC 280F(d)(5) as vehicles rated at 6,000 lbs. unloaded GVW or less. Vehicles over 6,000 lbs. GVWR are not subject to the IRC 280F(a) annual cap. However, they are still listed property as other transportation property and remain subject to the 50% qualified business use test and ADS recapture rules under IRC 280F(b). The relevant limit for heavy SUVs is IRC 179(b)(5): the Section 179 deduction for an SUV is limited to 25% of cost, up to an annually adjusted dollar cap (verify at IRS.gov). IRC 168(k) bonus depreciation applies without an IRC 280F-style dollar cap, subject to the 50% business-use test. Cite IRC 280F(d)(5) and IRC 179(b)(5).
What is the leased vehicle inclusion amount and where do I report it?

Under IRC 280F(c), lessees of passenger automobiles must include an IRS-determined amount in gross income each year of the lease to prevent circumventing the IRC 280F(a) cap through leasing. The inclusion amount is based on the vehicle's fair market value at the start of the lease and the lease year number. The IRS publishes the inclusion amounts in an annual Revenue Procedure (confirm the current-year table at IRS.gov). The lessee prorates the table amount by the business-use percentage and lease days in the year, then includes the result in gross income (reported as other income on the applicable business return line -- not on Form 4562). The lease payment deduction is taken separately. Cite IRC 280F(c) and the applicable Rev. Proc.; confirm reporting instructions in the Form 4562 instructions and IRS.gov.
Do I still need a mileage log if my client claims 100% business use?

Yes. IRC 274(d) imposes a strict substantiation requirement on all listed property including vehicles, regardless of the business-use percentage claimed. A taxpayer claiming 100% business use must maintain a contemporaneous written record documenting the business purpose, date, destination, and amount (miles) for each business trip. A log reconstructed from memory or calendar entries after the fact does not satisfy the "contemporaneous" standard under IRC 274(d). The IRS routinely disallows vehicle deductions on audit when the taxpayer cannot produce contemporaneous records. Practitioners should advise clients to begin keeping a contemporaneous mileage log on the first day of business use and maintain it throughout the vehicle's depreciable life. Cite IRC 274(d) and Treas. Reg. 1.274-5T.
How does OBBBA change the IRC 280F cap amounts for vehicles placed in service in 2025 and later?

OBBBA (enacted July 4, 2025) raised the IRC 280F(a)(1)(B) first-year additional depreciation allowance for passenger automobiles placed in service in tax years beginning after the OBBBA effective date. The post-OBBBA Year 1 cap is materially higher than the pre-OBBBA TCJA amount. A practitioner who applies the pre-OBBBA cap to a vehicle purchased in 2025 or 2026 will understate the allowable first-year deduction. The precise post-OBBBA Year 1 cap is published in the applicable IRS Revenue Procedure; confirm the current amount at IRS.gov before filing or advising. The Year 2, Year 3, and Year 4+ cap amounts are also subject to annual Rev. Proc. updates and must be confirmed separately for the applicable tax year. Even with the higher post-OBBBA cap, the annual ceiling still applies; excess depreciation carries forward to future years.

Disclaimer and Verification Requirement

This guide is for informational and educational purposes only. It does not constitute legal or tax advice and does not establish a practitioner-client relationship. All statutory references, regulatory citations, IRS Revenue Procedure figures, and other guidance cited in this guide must be independently verified against the current text of IRC 280F, IRC 168(k) as amended by OBBBA, IRC 179, IRC 274(d), the applicable IRS Revenue Procedure (for annual cap amounts and leased vehicle inclusion amounts), current IRS.gov guidance, applicable state statutes, and current state agency guidance before reliance in any specific client matter. The IRC 280F annual cap amounts, the IRC 179(b)(5) SUV ceiling, and the leased vehicle inclusion amounts are all subject to annual adjustment and must be confirmed at IRS.gov for the applicable tax year. Tax law changes after the publication date of this guide are not reflected herein. Practitioners must exercise independent professional judgment and conduct their own legal and factual analysis for each client matter.

IRC 280F: Listed Property and Luxury Vehicle Depreciation Caps, the 50% Business-Use Test, and OBBBA Update