By Gary G. Wallace, CPA, Managing Partner
What businesses need to know about vehicles placed in service in 2026
If your business relies on vehicles, the timing of your vehicle purchase and when you begin placing them in service can have a direct impact on your tax savings. The IRS has released Revenue Procedure 2026-15, which outlines the annual depreciation limits for passenger vehicles placed in service or with a lease term beginning in calendar year 2026. Understanding these changes will help determine your business’ 2026 tax strategy.
What qualifies as a passenger vehicle
The Internal Revenue Service (IRS) defines a passenger vehicle as any four-wheeled vehicle designed mainly for use on public roads with an unloaded gross vehicle weight of 6,000 pounds or less (including trucks and vans). It also includes any parts or components attached or typically included at purchase.
The following are not considered passenger vehicles:
- Ambulances, hearses, or combination vehicles used in a trade or business
- Vehicles used to transport people or goods for pay
- Qualified nonpersonal use trucks or vans
Depreciation limits
The IRS caps how much you can depreciate a vehicle each year, and those limits are adjusted periodically for inflation. The amount you can deduct depends on when the vehicle is first placed in service for business use.
Bonus depreciation allows an additional first-year write-off.
- Vehicles placed in service after January 19, 2025, may qualify for 100% bonus depreciation, allowing you to deduct the full cost in the first year (subject to annual limits).
- Vehicles purchased between September 27, 2017, and January 19, 2025, but first used in 2026, are subject to the phase-out rules, allowing a 20% bonus deduction in the first year.
The IRS provides three tables to help determine your allowable deductions:
Table 1: Applies to vehicles acquired after September 27, 2017, and placed in service during calendar year 2026, qualifying them for bonus depreciation and includes first-year limits with the additional write-off.
| Tax Year | Amount |
|---|---|
| 1st Year | $20,300 |
| 2nd Year | $19,800 |
| 3rd Year | $11,900 |
| Each Succeeding Year | $7,160 |
Table 2: Applies if no additional bonus depreciation applies to a vehicle placed in service in calendar year 2026.
Tax Year Amount
1st Year $12,300
2nd Year $19,800
3rd Year $11,900
Each Succeeding Year $7,160
The IRS also provides a third table that applies to leased vehicles and outlines how much additional income must be reported based on the vehicle’s fair market value.
When bonus depreciation is not allowed
You cannot claim bonus depreciation if:
- The vehicle is used 50% or less for business,
- You elect not to take bonus depreciation, or
- The vehicle is not new to you and does not meet specific eligibility rules.
The timing of your vehicle purchase and when you begin using the vehicle for business can significantly impact your deductions. Planning ahead can help you maximize tax benefits while staying compliant.
If you are considering a vehicle purchase for your business or want to review your current tax deduction strategy, contact your Opportunity Advisor.
About the Author
Gary G. Wallace, CPA, Managing Partner
Gary provides tax and business advisory services to business and individual clients. He has advised clients in various aspects of restructurings, including tax aspects of debt workouts and foreclosures, forgiveness of indebtedness, bankruptcy restructurings and liquidations, establishing liquidating trusts and partner-partnership transactions. Gary also has significant knowledge and experience in individual taxation, business taxation, and advising clients on all aspects of tax matters. He is the Managing Partner of the Firm.
More Insights from Gary G. WallaceThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
