Luxury Auto Depreciation Limits for 2026 (and 2025): What Contractors Can Deduct

If you are buying a vehicle for your construction business, the size of your deduction comes down to one number printed on the driver’s door jamb: the gross vehicle weight rating. Cross 6,000 pounds and the IRS caps fall away. Stay under it and your write-off is limited to a few thousand dollars a year no matter what you paid for the truck.

Here are the current limits, taken directly from the IRS revenue procedures, and what they mean when you are the one signing the purchase order.

2026 luxury auto depreciation limits

These caps come from Revenue Procedure 2026-15 and apply to passenger automobiles placed in service during calendar year 2026. Read the rows as the most you may deduct in each successive year you own the vehicle, not as limits for different purchase years. This distinction trips people up constantly.

2025 luxury auto depreciation limits

If you are still finishing a 2025 return on extension, these are the figures you need. They come from Revenue Procedure 2025-16 and apply to passenger automobiles placed in service during calendar year 2025.

The 6,000-pound line that changes everything

Those caps only apply to what the tax code calls a passenger automobile. Section 280F(d)(5) defines that as a four-wheeled vehicle made primarily for public roads and rated at 6,000 pounds unloaded gross vehicle weight or less. For trucks and vans the test uses gross vehicle weight rating rather than unloaded weight, which is a meaningful difference in your favor.

Go above 6,000 pounds and the vehicle is simply not a passenger automobile. The luxury caps in the tables above do not apply to it at all. This is why the three-quarter-ton pickup in the yard is treated so differently from the sedan the estimator drives.

Heavy does not mean unlimited: the $32,000 SUV cap

This is where contractors get hurt, and it is the part most articles leave out. Escaping Section 280F does not mean you can expense the whole vehicle under Section 179.

Section 179(b)(5) imposes a separate cap on sport utility vehicles rated between 6,000 and 14,000 pounds GVWR. For tax years beginning in 2026 that cap is $32,000, per Revenue Procedure 2025-32. A $90,000 heavy SUV does not produce a $90,000 Section 179 deduction.

Two things soften it. Pickups with a cargo bed of at least six feet that is not readily accessible from the passenger compartment fall outside the SUV definition, so most work trucks are not subject to the $32,000 cap. And the cap applies to Section 179 only. It does not apply to bonus depreciation, which matters a great deal right now.

Bonus depreciation is back at 100 percent

The One Big Beautiful Bill Act restored 100% bonus depreciation and made it permanent for qualifying property acquired after January 19, 2025. If you entered a written binding contract before January 20, 2025, the property is treated as acquired on that contract date, which can push it back under the older phase-down percentages.

Because bonus depreciation is not subject to the $32,000 SUV cap, a heavy SUV used predominantly for business can often be written off in full in year one through Section 168(k) even though Section 179 alone would not get you there.

For completeness, the broader Section 179 numbers for tax years beginning in 2026 are a $2,560,000 maximum deduction, phasing down once Section 179 property placed in service exceeds $4,090,000.

California does not follow any of this

If you operate in California, run the numbers twice. California does not conform to federal bonus depreciation under Section 168(k), and it caps the Section 179 deduction at $25,000, reduced once Section 179 property placed in service exceeds $200,000.

A contractor who writes off an $85,000 truck in full on the federal return may be depreciating that same truck over years for California. The federal savings are real, but the state liability does not move nearly as much, and planning that ignores the gap produces a nasty April surprise.

What this looks like on an actual purchase

Say you buy an $85,000 pickup rated at 7,200 pounds GVWR with a seven-foot bed, placed in service in 2026 and used 90% for the business.

It is over 6,000 pounds, so the Section 280F luxury caps never enter the picture. The bed length keeps it outside the SUV definition, so the $32,000 cap does not apply either. Your depreciable basis is the business-use share, $76,500, and 100% bonus depreciation can take all of it in year one for federal purposes. For California, you are looking at a $25,000 Section 179 deduction at most, then regular depreciation on the rest.

Now change one fact. Make it a $85,000 SUV rated at 6,800 pounds. Still over 6,000 pounds, still outside the luxury caps, but now the $32,000 Section 179 ceiling applies, and you would rely on bonus depreciation to get the rest of the basis deducted.

The test that undoes all of it

Every number above assumes the vehicle is used more than 50% for qualified business use. Section 280F(b) treats vehicles as listed property. If business use is 50% or less, you lose accelerated depreciation entirely and depreciate under the alternative depreciation system, and prior accelerated deductions can be recaptured.

Commuting does not count as business use. A contemporaneous mileage log is what defends the deduction, and it is the single most common thing missing when one of these deductions gets examined.

Leasing instead

Leasing does not avoid the rules, it reroutes them. Lessees of passenger automobiles with a fair market value at or above $62,000 for leases beginning in 2026 must report an annual lease inclusion amount, which reduces the deduction to approximate what the depreciation caps would have allowed.

Before you sign

The decision worth getting right is made at the dealership, not at tax time. GVWR, bed length, business-use percentage and the timing of when the vehicle is placed in service all change the answer, and California conformity changes it again. If you are weighing a purchase this year, our construction accounting and tax planning team can model the federal and California outcomes side by side before you commit.

Figures verified against IRS Revenue Procedure 2026-15, Revenue Procedure 2025-16, Revenue Procedure 2025-32, and California FTB Form 3885 instructions. This is general information, not advice for your specific situation.

Weighing a purchase against a lease on the same truck? Run both through our buy vs lease calculator for contractors before you sign.

Disclaimer: This content is provided for educational purposes only and is not legal, tax, accounting, or financial advice. Every situation is unique, so consult your own attorney, CPA, or financial advisor before making decisions based on this information.