Depreciation
Quick definition
Deducting the purchase cost of a business vehicle over its useful life, instead of all at once.
Depreciation is how the tax code recognizes that a vehicle loses value over time. Instead of deducting the full purchase price the year you buy it, you deduct portions of it across multiple years.
Two ways depreciation enters mileage math
Under the standard mileage rate, depreciation is already baked into the per-mile number. You do not deduct it separately. Under the actual expenses method, you calculate depreciation and deduct it directly.
MACRS and the luxury cap
Vehicles used for business are typically depreciated under MACRS (Modified Accelerated Cost Recovery System) over five years. There is a separate "luxury auto" cap that limits annual depreciation on passenger cars to a published dollar figure (around $20,400 in year one for 2026 model-year vehicles, less in subsequent years).
Section 179 and bonus depreciation
Heavy vehicles (over 6,000 pounds gross weight) qualify for accelerated deductions under Section 179 and bonus depreciation. This is one reason actual expenses can dramatically beat standard for owners of large pickups and SUVs.
Related terms
Actual Expenses Method
Deduct real vehicle costs times your business-use percentage, instead of using a flat per-mile rate.
Section 179
A federal tax provision that lets businesses deduct the full cost of qualifying vehicles in the year of purchase, instead of depreciating them over time.
Standard Mileage Rate
The IRS-published per-mile deduction amount. 72.5 cents per business mile for 2026.
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