Key Takeaways

• The IRS has updated 2026 depreciation limits for passenger vehicles used in business.
• Even with bonus depreciation, passenger automobiles remain subject to Section 280F deduction caps.
• Dentists who purchase higher-value vehicles may not be able to deduct the full cost as quickly as expected.
• Vehicle deductions depend heavily on documented business use, including accurate mileage records.
• Dentists considering whether to buy or lease a vehicle through their practice should review the tax implications in advance.

Many dentists use vehicles in their business, whether it’s traveling between multiple offices, visiting labs or suppliers, attending continuing education, or handling administrative responsibilities for the practice.

Because vehicles can represent a significant expense, tax deductions related to them often become part of broader tax planning. Each year, the IRS adjusts the amount that can be deducted for passenger vehicles used in a business.

For 2026, those limits have been updated again. While the increases are modest, they still matter for practice owners considering whether to buy, finance, or lease a vehicle through the practice.

Why Vehicle Depreciation Has Limits

Under Internal Revenue Code Section 280F, the IRS places caps on how quickly a business can depreciate passenger vehicles. These limits exist because vehicles are considered “listed property,” meaning they are often used for both business and personal purposes. Instead of allowing businesses to write off the entire cost immediately, the IRS restricts the deduction amount each year.

These limits apply to passenger automobiles used for business, including cars, trucks, and vans placed in service after September 27, 2017. The limits are adjusted annually for inflation. (IRS Revenue Procedure 2026-15)

2026 Depreciation Limits for Business Vehicles

For vehicles placed in service during 2026, the maximum depreciation deductions are:

If bonus depreciation is used:

• Year 1: $20,300
• Year 2: $19,800
• Year 3: $11,900
• Each year after: $7,160

If bonus depreciation is not used:

• Year 1: $12,300
• Year 2: $19,800
• Year 3: $11,900
• Each year after: $7,160

These figures represent modest increases from 2025 and reflect adjustments tied to the automobile component of the Chained Consumer Price Index for Urban Consumers (C-CPI-U). 

While these limits may seem technical, they can influence whether purchasing a vehicle provides the tax outcome you expect.

What This Means for Dental Practice Owners

For dentists, vehicles are rarely the largest tax deduction in a practice. However, they often play a role in broader tax planning.

Common scenarios include:

• A dentist who owns multiple practice locations and travels between them.
• Practice owners who use a vehicle to visit labs, vendors, or satellite offices.
• Dentists attending continuing education programs or professional meetings.
• Owners running administrative tasks related to the practice.

In these situations, vehicle use may qualify as a legitimate business expense, but the depreciation caps still apply. That means a dentist who purchases a high-value vehicle for business purposes may not be able to deduct the full cost as quickly as expected.

Bonus Depreciation Still Plays a Role

Bonus depreciation can increase the first-year deduction for vehicles, but passenger automobile limits still apply.

Under current law, bonus depreciation allows businesses to deduct a portion of an asset’s cost in the first year it is placed in service. The percentage allowed has been gradually decreasing after the Tax Cuts and Jobs Act expanded it to 100%. Even with bonus depreciation available, the Section 280F caps prevent passenger vehicles from being fully written off immediately.

For certain heavier vehicles used primarily for business, different rules may apply under Section 179 or other depreciation provisions. The specific treatment depends on factors such as vehicle weight and business use percentage.

Leasing Has Its Own Tax Rules

Some dentists choose to lease a vehicle through the practice rather than purchase one, especially when they prefer predictable payments or plan to replace vehicles more frequently.

However, leasing does not completely avoid the tax limitations that apply to passenger vehicles.

Under Section 280F of the Internal Revenue Code, the IRS applies what is known as a lease inclusion amount for certain higher-value vehicles. This rule slightly reduces the deduction for leased vehicles to keep the tax treatment of leasing and purchasing relatively consistent.

The calculation depends on the vehicle’s value when the lease begins and the IRS inclusion tables for that year. Revenue Procedure 2026-15 includes updated inclusion tables for vehicles first leased in 2026.

Because the rules for leased vehicles are calculated differently from depreciation limits, we’ll walk through them in more detail in a separate article: Leasing a Business Vehicle? What Dentists Should Know About the IRS Lease Inclusion Rule.

Business Use Still Matters

Regardless of whether a vehicle is purchased or leased, deductions depend heavily on how much the vehicle is used for business.

If a vehicle is used partly for personal purposes, only the business-use portion of expenses or depreciation is deductible.

Maintaining proper mileage logs and documentation is important for substantiating business use if questions arise. The IRS specifically notes that listed property deductions require detailed records to support the percentage of business use. (IRS Publication 463)

Final Thoughts

The IRS’s updated 2026 depreciation limits are a reminder that vehicle deductions rarely work the way people expect. Even though the limits increased slightly this year, passenger automobiles remain subject to caps that restrict how quickly the cost can be written off.

For dentists considering a vehicle purchase or lease through their practice, it’s worth reviewing the tax implications in advance. Small planning decisions can affect deductions not just in the first year, but for several years afterward.

If you are evaluating a vehicle purchase, adding another location, or simply want to understand how these rules apply to your practice, discussing the details with us can help ensure the decision fits into your overall financial strategy.