Car Used 50% or Less for Business: Business Travel and Vehicle Expenses (2025 IRS Guide)
This guide covers “Car Used 50% or Less for Business” within business travel and vehicle expenses. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.
Adapted from Publication 463 (2025), Travel, Gift, and Car Expenses, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.
Context for these rules
If you don’t use the standard mileage rate, you may be able to deduct your actual car expenses.
Actual car expenses include:
If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Continue to keep records, as explained later in chapter 5.
Car Used 50% or Less for Business
If you use your car 50% or less for qualified business use (defined earlier under Depreciation Deduction) either in the year the car is placed in service or in a later year, special rules apply. The rules that apply in these two situations are explained in the following paragraphs. (For this purpose, “car” was defined earlier under Actual Car Expenses and includes certain trucks and vans.)
Qualified business use 50% or less in year placed in service.
If you use your car 50% or less for qualified business use, the following rules apply.
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You can’t take the section 179 deduction.
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You can’t take the special depreciation allowance.
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You must figure depreciation using the straight line method over a 5-year recovery period. You must continue to use the straight line method even if your percentage of business use increases to more than 50% in a later year.
Instead of making the computation yourself, you can use column (c) of Table 4-1 to find the percentage to use.
Example.
In May 2025, you bought and placed in service a car for $17,500. You used it 40% for your consulting business. Because you didn’t use the car more than 50% for business, you can’t take any section 179 deduction or special depreciation allowance, and you must use the straight line method over a 5-year recovery period to recover the cost of your car.
You deduct $700 in 2025. This is the lesser of:
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$700 (($17,500 cost × 40% (0.40) business use) × 10% (0.10) recovery percentage (from column (c) of Table 4-1)), or
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$4,880 ($12,200 maximum limit × 40% (0.40) business use).
Qualified business use 50% or less in a later year.
If you use your car more than 50% in qualified business use in the tax year it is placed in service but the business use drops to 50% or less in a later year, you can no longer use an accelerated depreciation method for that car.
For the year the business use drops to 50% or less and all later years in the recovery period, you must use the straight line depreciation method over a 5-year recovery period. In addition, for the year your business use drops to 50% or less, you must recapture (include in your gross income) any excess depreciation (discussed later). You also increase the adjusted basis of your car by the same amount.
Example.
In June 2022, you purchased a car for exclusive use in your business. You met the more-than-50%-use test for the first 3 years of the recovery period (2022 through 2024) but failed to meet it in the fourth year (2025). You determine your depreciation for 2025 using 20% (from column (c) of Table 4-1). You will also have to determine and include in your gross income any excess depreciation, discussed next.
Excess depreciation.
You must include any excess depreciation in your gross income and add it to your car’s adjusted basis for the first tax year in which you don’t use the car more than 50% in qualified business use. Use Form 4797, Sales of Business Property, to figure and report the excess depreciation in your gross income.
Excess depreciation is:
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The amount of the depreciation deductions allowable for the car (including any section 179 deduction claimed and any special depreciation allowance claimed) for tax years in which you used the car more than 50% in qualified business use, minus
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The amount of the depreciation deductions that would have been allowable for those years if you hadn’t used the car more than 50% in qualified business use for the year you placed it in service. This means the amount of depreciation figured using the straight line method.
Example.
In September 2021, you bought a car for $61,500 and placed it in service. You didn’t claim the section 179 deduction or the special depreciation allowance. You used the car exclusively in qualified business use for 2021, 2022, 2023, and 2024. For those years, you used the appropriate MACRS Depreciation Chart to figure depreciation deductions totaling $41,660 ($10,100 for 2021, $16,100 for 2022, $9,700 for 2023, and $5,760 for 2024) under the 200% DB method.
During 2025, you used the car 30% for business and 70% for personal purposes. Since you didn’t meet the more-than-50%-use test, you must switch from the 200% DB depreciation method to the straight line depreciation method for 2025, and include in gross income for 2025 your excess depreciation determined as follows.
| Total depreciation claimed: (MACRS 200% DB method) | $42,260 | |
| Minus total depreciation allowable: (Straight line method) | ||
| 2021—10% of $61,500 | $6,150 | |
| (Limit: $10,200) | ||
| 2022—20% of $61,500 | 12,300 | |
| (Limit: $16,400) | ||
| 2023—20% of $61,500 | 9,800 | |
| (Limit: $9,800) | ||
| 2024—20% of $61,500 | 5,860 | –34,110 |
| (Limit: $5,860) | ||
| Excess depreciation | $8,150 | |
In 2025, using Form 4797, you figure and report the $8,150 excess depreciation you must include in your gross income. Your adjusted basis in the car is also increased by $8,150. Your 2025 depreciation is $3,690 ($61,500 (unadjusted basis) × 30% (0.30) (business-use percentage) × 20% (0.20) (from column (c) of Table 4-1 on the line for Jan. 1–Sept. 30, 2021)). However, your depreciation deduction is limited to $1,758 ($5,860 x 30% (0.30) business use).
Using the guidance
Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.
Sources and further reading
- Publication 463 (2025), Travel, Gift, and Car Expenses: Transportation — Car Expenses — Actual Car Expenses — Car Used 50% or Less for Business — Internal Revenue Service; 2025 edition.
The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.