What is the MACRS recovery period for vehicles used in a small business?

For most vehicles used in a small business, the MACRS recovery period is 5 years under the General Depreciation System (GDS). However, because vehicles are "listed property" under IRC §280F, that 5-year recovery period comes with annual dollar caps, strict documentation requirements, and a mandatory switch to the Alternative Depreciation System (ADS) if business use drops to 50% or below. The exact depreciation limits depend on the vehicle's weight rating and whether bonus depreciation applies.

Recovery Periods by Vehicle Type

Category 1: Passenger Automobiles (≤6,000 lbs GVWR)

Passenger automobiles — most cars and light trucks or vans with a GVWR of 6,000 pounds or less — are subject to the "luxury automobile" annual depreciation caps under IRC §280F regardless of actual vehicle cost. These limits are adjusted for inflation by the IRS annually.

2025 Annual Caps — Rev. Proc. 2025-16

These caps apply to the business-use percentage of the vehicle only. A car used 80% for business has 80% of its depreciable basis available — that basis is then further limited by the annual caps above.(e.g., "$60,000 car × 80% = $48,000 depreciable basis, then capped at $20,200 in Year 1")

Category 2: Heavier Vehicles (6,001–14,000 lbs GVWR)

SUVs, pickup trucks, and vans with a GVWR above 6,000 pounds are not subject to the luxury automobile caps. The full business-use percentage of the vehicle cost can be depreciated or expensed. However, SUVs in this weight range have a separate Section 179 cap of $32,000 for 2026 per Rev. Proc. 2025-32. Heavy trucks and purpose-built cargo vans not designed for personal use — those with no rear seating and a fully enclosed cargo area — face no such §179 limitation and may be eligible for 100% first-year expensing.

Depreciation Method and Convention

• Method: 200% declining balance (DB), switching to straight-line when it yields a greater deduction. An election to use straight-line from the start is available on Form 4562.
• Convention: Half-year convention applies in most cases. The mid-quarter convention is required if more than 40% of all depreciable personal property is placed in service in the last quarter of the tax year.
• ADS required: If business use drops to 50% or below in any year during the recovery period, you must switch to ADS straight-line for the remaining years and recapture any excess depreciation previously claimed.

The 50% Business Use Requirement

Because vehicles are listed property, you must maintain a contemporaneous mileage log documenting business versus personal use for every year. Commuting between home and a regular place of business is not business use. If business use falls to 50% or below, prior accelerated depreciation (including Section 179 or bonus) must be recaptured as ordinary income under IRC §280F(b)(2).

NOTE

State conformity. California and several other states do not conform to federal bonus depreciation rules. Vehicles that qualify for 100% first-year federal expensing may still require multi-year depreciation for state purposes. Always check state conformity before planning large vehicle purchases.

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Sources:

IRC §280F - Limitation on Depreciation for Luxury Automobiles

IRC §168(e)(3)(B) - 5-Year Property Classification

Rev. Proc. 2025-16 - 2025 Luxury Automobile Depreciation Limits

Rev. Proc. 2025-32 - 2026 §179 SUV Limitation

IRS Publication 946 - How to Depreciate Property, Chapter 5 (Listed Property)

IRS Publication 463 - Travel, Gift, and Car Expenses