For the first time in at least three years, the IRS issued lower depreciation limitations for passenger automobiles. These limits are updated annually for inflation, based on the automobile component of the Chained Consumer Price Index for Urban Consumers.

Rev. Proc. 2025-16, released Wednesday, contains the Sec. 280F(a) inflation-adjusted dollar limitations on depreciation deductions for passenger automobiles — which include trucks and vans — acquired after Sept. 27, 2017, and placed in service during 2025, for 2025 and each succeeding tax year.

For passenger vehicles for which Sec. 168(k) additional first-year, or “bonus,” depreciation is applied, the limitation is $20,200 for the first tax year, a decrease of $200 from the 2024 amount. The increase from 2021 to 2022 and 2022 to 2023 was $1,000 each year. For 2023 to 2024, the increase was $200.

The succeeding-year limitations are $19,600 for the second tax year (a decrease of $200 from 2024); $11,800 for the third year (a decrease of $100); and $7,060 for each year after that (a decrease of $100). If bonus depreciation does not apply, the 2025 first-year limitation is $12,200 ($200 lower than 2024), and the succeeding years’ limitations are the same as for vehicles eligible for the bonus depreciation.

The revenue procedure also provides a table of the inflation-updated amounts for a lease term beginning in calendar 2024 by which a deduction for a leased passenger automobile must be reduced under Sec. 280F(c)(2). This limitation is expressed as an inclusion in gross income, which is determined by applying a formula to a dollar amount. The dollar amounts, for each tax year during a lease, are correlated to the ranges of vehicles’ fair market value.

For the 12 months ending January 2025, the price of used cars and trucks rose 1%, and the price of new cars dropped by 0.3%, according to the Bureau of Labor Statistics. Both percentages are not seasonally adjusted.