Depreciation Deduction: Business Travel and Vehicle Expenses (2025 IRS Guide)

This guide covers “Depreciation Deduction” 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.

Depreciation Deduction

If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car.

You generally need to know the following things about the car you intend to depreciate.

• Your basis in the car.

• The date you place the car in service.

• The method of depreciation and recovery period you will use.

Basis.

Your basis in a car for figuring depreciation is generally its cost. This includes any amount you borrow or pay in cash, other property, or services.

Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis, later). However, in some situations, you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). For one of these situations, see Exception under Methods of depreciation, later.

If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value (FMV) or your adjusted basis in the car on the date of conversion. Additional rules concerning basis are discussed later in this chapter under Unadjusted basis.

Placed in service.

You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Depreciation begins when the car is placed in service for use in your work or business or for the production of income.

For purposes of figuring depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion.

Car placed in service and disposed of in the same year.

If you place a car in service and dispose of it in the same tax year, you can’t claim any depreciation deduction for that car.

Methods of depreciation.

Generally, you figure depreciation on cars using MACRS discussed later in this chapter.

Exception.

If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you can’t depreciate your car under the MACRS rules. You must use straight line depreciation over the estimated remaining useful life of the car. The amount you depreciate can’t be more than the depreciation limit that applies for that year. See Depreciation Limits, later.

To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. The rate per mile varies depending on the year(s) you used the standard mileage rate. For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later.

This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis. You must use your adjusted basis in your car to figure your depreciation deduction. For additional information on the straight line method of depreciation, see Pub. 946.

More-than-50%-use test.

Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car.

If your business use is 50% or less, you must use the straight line method to depreciate your car. This is explained later under Car Used 50% or Less for Business.

Qualified business use.

A qualified business use is any use in your trade or business. It doesn’t include use for the production of income (investment use) or use provided under lease to, or as compensation to, a 5% owner or related person. However, you do combine your business and investment use to figure your depreciation deduction for the tax year.

Use of your car by another person.

Don’t treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions.

• It is directly connected with your business.

• It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income).

• It results in a payment of fair market rent. This includes any payment to you for the use of your car.

Business use changes.

If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later.

Tip:

Property doesn’t cease to be used more than 50% in qualified business use by reason of a transfer at death.

Use for more than one purpose.

If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. You do this on the basis of mileage. Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose.

Change from personal to business use.

If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. In this case, you figure the percentage of business use for the year as follows.

1. Determine the percentage of business use for the period following the change. Do this by dividing business miles by total miles driven during that period.

2. Multiply the percentage in (1) by a fraction. The numerator (top number) is the number of months the car is used for business, and the denominator (bottom number) is 12.

Example.

You use a car only for personal purposes during the first 6 months of the year. During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. This gives you a business-use percentage of 80% (12,000 ÷ 15,000) for that period. Your business use for the year is 40% (80% (0.80) × ⁶/₁₂).

Limits.

The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. The maximum amount you can claim depends on the year in which you placed your car in service. You have to reduce the maximum amount if you didn’t use the car exclusively for business. See Depreciation Limits, later.

Unadjusted basis.

You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS). Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts.

To figure your unadjusted basis, begin with your car’s original basis, which is generally its cost. Cost includes sales taxes (see Sales taxes, earlier), destination charges, and dealer preparation. Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, and vehicle credits claimed. See Pub. 551, Basis of Assets, for further details.

Caution:

If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. See Car Used 50% or Less for Business, later, for more information.

If you acquired the car by gift or inheritance, see Pub. 551, Basis of Assets, for information on your basis in the car.

Improvements.

A major improvement to a car is treated as a new item of 5-year recovery property. It is treated as placed in service in the year the improvement is made. It doesn’t matter how old the car is when the improvement is added. Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Your car’s depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) can’t be more than the depreciation limit that applies for that year. See Depreciation Limits, later.

Car trade-in.

If you traded one car (the “old car”) for another car (the “new car”) in 2025, you must treat the transaction as a disposition of the old car and the purchase of the new car. You must treat the old car as disposed of at the time of the trade-in. The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car’s use had been for business purposes) plus any additional amount you paid for the new car. You then figure your depreciation deduction for the new car beginning with the date you placed it in service. You must also complete Form 2106, Part II, Section D. This method is explained later, beginning at Effect of trade-in on basis.

Caution:

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. Due to the suspension of miscellaneous itemized deductions subject to the 2% floor under section 67(a), employees who don’t fit into one of the listed categories may not use Form 2106.

Effect of trade-in on basis.

The discussion that follows applies to trade-ins of cars in 2025, where the election was made to treat the transaction as a disposition of the old car and the purchase of the new car. For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2025, for which the election wasn’t made, see Pub. 946 and Regulations section 1.168(i)-6(d)(3).

Note:

Like‐kind exchanges completed after December 31, 2017, are generally limited to exchanges of real property not held primarily for sale. Regulations section 1.168(i)-6 doesn’t reflect this change in law.

Traded car used only for business.

If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car.

Example.

You trade in a car that has an adjusted basis of $5,000 for a new car. In addition, you pay cash of $20,000 for the new car. Your original basis of the new car is $25,000 (your $5,000 adjusted basis in the old car plus the $20,000 cash paid). Your unadjusted basis is $25,000 unless you claim the section 179 deduction, special depreciation allowance, or have other increases or decreases to your original basis, discussed under Unadjusted basis, earlier.

Traded car used partly in business.

If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. (This adjustment isn’t used, however, when you determine the gain or loss on the later disposition of the new car. See Pub. 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car.)

To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Then subtract from that total the excess, if any, of:

1. The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over

2. The total of the amounts actually allowed as depreciation during those years.

For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) next.

Modified Accelerated Cost Recovery System (MACRS).

MACRS is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income.

The maximum amount you can deduct is limited, depending on the year you placed your car in service. See Depreciation Limits, later.

Recovery period.

Under MACRS, cars are classified as 5-year property. You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year.

For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Pub. 946.

Depreciation methods.

You can use one of the following methods to depreciate your car.

• The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.

• The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.

• The straight line method (SL) over a 5-year recovery period.

Tip:

If you use Table 4-1 (discussed later) to determine your depreciation rate for 2025, you don’t need to determine in what year using the straight line method provides an equal or greater deduction. This is because the chart has the switch to the straight line method built into its rates.

Before choosing a method, you may wish to consider the following facts.

• Using the straight line method provides equal yearly deductions throughout the recovery period.

• Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year.

MACRS depreciation chart.

A 2025 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1. Using this table will make it easy for you to figure the 2025 depreciation deduction for your car. A similar chart appears in the Instructions for Form 2106.

Caution:

You may have to use the tables in Pub. 946 instead of using this MACRS Depreciation Chart.

You must use the Depreciation Tables in Pub. 946 rather than the 2025 MACRS Depreciation Chart in this publication if any one of the following three conditions applies to you.

1. You file your return on a fiscal-year basis.

2. You file your return for a short tax year (less than 12 months).

3. During the year, all of the following conditions apply.

   1. You placed some property in service from January through September.

   2. You placed some property in service from October through December.

   3. Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year.

Depreciation in future years.

If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. However, you can’t continue to use the chart if your basis in your car is adjusted because of a casualty. In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. See Figuring the Deduction Without Using the Tables in chapter 4 of Pub. 946.

Tip:

In future years, don’t use the chart in this edition of the publication. Instead, use the chart in the publication or the form instructions for those future years.

Disposition of car during recovery period.

If you dispose of the car before the last year of the recovery period, you are generally allowed a half-year of depreciation in the year of disposition. This rule applies unless the mid-quarter convention applies to the vehicle being disposed of. See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition.

How to use the 2025 chart.

To figure your depreciation deduction for 2025, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. If you prefer to figure your depreciation deduction without the help of the chart, see Pub. 946.

Caution:

Your deduction can’t be more than the maximum depreciation limit for cars. See Depreciation Limits, later.

Example.

You bought a used truck in February 2024 to use exclusively in your landscape business. You paid $9,200 for the truck with no trade-in. You didn’t claim any section 179 deduction, the truck didn’t qualify for the special depreciation allowance, and you chose to use the 200% DB method to get the largest depreciation deduction in the early years.

You used the MACRS Depreciation Chart in 2024 to find your percentage. The unadjusted basis of the truck equals its cost because you used it exclusively for business. You multiplied the unadjusted basis of the truck, $9,200, by the percentage that applied, 20%, to figure your 2024 depreciation deduction of $1,840.

In 2025, you used the truck for personal purposes when you repaired your parent’s cabin. Your records show that the business use of the truck was 90% in 2025. You used Table 4-1 to find your percentage. Reading down the first column for the date placed in service and across to the 200% DB column, you locate your percentage, 32%. You multiply the unadjusted basis of the truck, $8,280 ($9,200 cost × 90% (0.90) business use), by 32% (0.32) to figure your 2025 depreciation deduction of $2,650.

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 — Depreciation Deduction — 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.