IRS Issues Lower Passenger Auto Depreciation Limitations
The IRS recently released Rev. Proc. 2025-16, issuing lower depreciation limitations for passenger automobiles. This is the first time the limits have been decreased in at least three years.
The revenue procedure covers the Sec. 280F(a) inflation-adjusted dollar limitations on depreciation deductions for passenger automobiles, including trucks and vans, acquired after Sept. 27, 2017, and placed in service during 2025, for 2025 and each tax year thereafter.
For passenger automobiles for which the Sec. 168(k) first-year, or "bonus," depreciation is applied, the limitation is $20,200 for the first tax year, a decrease of $200 from 2024. If bonus depreciation does not apply, the 2025 first-year limitation is $12,200 (a decrease of $200 from 2024).
The succeeding-year limitations are $19,600 for the second year (a decrease of $200 from 2024), $11,800 for the third year (a decrease of $100 from 2024), and $7,060 for each year after (a decrease of $100 from 2024).
In addition, the procedure includes a table of the inflation-updated amounts for a lease term beginning in calendar year 2024 by which a deduction for a leased passenger automobile must be reduced under Sec. 280F(c)(2).
The depreciation limits are updated annually for inflation in accordance with the automobile component of the chained consumer price index for urban consumers.