rp-25-16.pdf

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26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement;
determination of correct tax liability.
(Also Part I, §§ 280F; 1.280F-7.)

Rev. Proc. 2025-16

SECTION 1. PURPOSE
This revenue procedure provides: (1) two tables of limitations on depreciation
deductions for owners of passenger automobiles placed in service by the taxpayer
during calendar year 2025; and (2) a table of dollar amounts that must be used to
determine income inclusions by lessees of passenger automobiles with a lease term
beginning in calendar year 2025. These tables reflect the automobile price inflation
adjustments required by § 280F(d)(7) of the Internal Revenue Code. For purposes of
this revenue procedure, the term “passenger automobiles” includes trucks and vans.
SECTION 2. BACKGROUND
.01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on
the depreciation deduction for the year the taxpayer places the passenger automobile in
service and for each succeeding year. For passenger automobiles placed in service
after 2018, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts
allowable as depreciation deductions by a price inflation adjustment amount that is
determined using the automobile component of the Chained Consumer Price Index for

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All Urban Consumers published by the Department of Labor (C-CPI-U).
.02 Section 168(k)(1) provides that, in the case of qualified property, the depreciation
deduction allowed under § 167(a) for the taxable year in which the property is placed in
service includes an allowance equal to the applicable percentage of the property’s
adjusted basis, referred to as “§ 168(k) additional first year depreciation deduction”
hereinafter. Pursuant to § 168(k)(6)(A), the applicable percentage is 100 percent for
qualified property acquired and placed in service after September 27, 2017, and placed
in service before January 1, 2023, and is phased down 20 percent each year for
property placed in service through December 31, 2026. Accordingly, the applicable
percentage for qualified property acquired after September 27, 2017, and placed in
service after December 31, 2024, and before January 1, 2026, is 40 percent. Pursuant
to § 168(k)(8)(D)(i), no § 168(k) additional first year depreciation deduction is allowed or
allowable for qualified property acquired by the taxpayer before September 28, 2017,
and placed in service by the taxpayer after 2019. For qualified property acquired and
placed in service after September 27, 2017, § 168(k)(2)(F)(i) increases the first-year
depreciation allowed under § 280F(a)(1)(A)(i) by $8,000.
.03 Tables 1 and 2 of this revenue procedure provide depreciation limitations for
passenger automobiles placed in service by the taxpayer during calendar year 2025.
Table 1 provides depreciation limitations for passenger automobiles acquired by the
taxpayer after September 27, 2017, and placed in service by the taxpayer during
calendar year 2025, for which the § 168(k) additional first year depreciation deduction
applies. Table 2 provides depreciation limitations for passenger automobiles placed in
service by the taxpayer during calendar year 2025 for which no § 168(k) additional first

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year depreciation deduction applies. The § 168(k) additional first year depreciation
deduction does not apply for 2025 if the taxpayer: (1) did not use the passenger
automobile during 2025 more than 50 percent for business purposes; (2) elected out of
the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(7) for the
class of property that includes passenger automobiles; (3) acquired the passenger
automobile used and the acquisition of such property did not meet the acquisition
requirements in § 168(k)(2)(E)(ii) and § 1.168(k)-2(b)(3)(iii) of the Income Tax
Regulations; or (4) acquired the passenger automobile before September 28, 2017, and
placed it in service after 2019.
.04 Section 280F(c)(2) requires a reduction to the amount allowable as a deduction
to the lessee of a leased passenger automobile. Pursuant to § 280F(c)(3), the
reduction must be substantially equivalent to the limitations on the depreciation
deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a), this
reduction is accomplished by requiring the lessee to include in gross income an amount
determined by applying a formula to a dollar amount obtained from a table.
.05 Table 3 of this revenue procedure provides the dollar amount used by lessees of
passenger automobiles with a lease term beginning in 2025 to determine the income
inclusion amount for those passenger automobiles. The table provides dollar amounts
for a range of passenger automobile fair market values.
SECTION 3. SCOPE
.01 The limitations on depreciation deductions in Tables 1 and 2 in section 4.01(2) of
this revenue procedure apply to passenger automobiles, other than leased passenger
automobiles, that are placed in service by the taxpayer in calendar year 2025 and

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continue to apply for each taxable year that the passenger automobile remains in
service.
.02 The dollar amounts in Table 3 of this revenue procedure apply to leased
passenger automobiles with a lease term beginning in calendar year 2025 and continue
to apply for each taxable year during the lease.
.03 For other recent calendar years, see Rev. Proc. 2020-37, 2020-33 I.R.B. 381, for
passenger automobiles placed in service or leased during calendar year 2020; Rev.
Proc. 2021-31, 2021-34 I.R.B. 324, for passenger automobiles placed in service or
leased during calendar year 2021; Rev. Proc. 2022-17, 2022-13 I.R.B. 930, for
passenger automobiles placed in service or leased during calendar year 2022; Rev.
Proc. 2023-14, 2023-6 I.R.B. 466, for passenger automobiles placed in service or
leased during calendar year 2023; and Rev. Proc. 2024-13, 2024-9 I.R.B. 678, for
passenger automobiles placed in service or leased during calendar year 2024.
SECTION 4. APPLICATION
.01 Limitations on Depreciation Deductions for Certain Automobiles.
(1) Amount of the inflation adjustment. Under § 280F(d)(7)(B)(i), the automobile
price inflation adjustment for any calendar year is the percentage (if any) by which the
C- CPI-U automobile component for October of the preceding calendar year exceeds
the automobile component of the CPI (as defined in § 1(f)(4)) for October of 2017,
multiplied by the amount determined under § 1(f)(3)(B). The amount determined
under § 1(f)(3)(B) is the amount obtained by dividing the new vehicle component of the
C- CPI-U for calendar year 2016 by the new vehicle component of the CPI for calendar
year 2016, where the C-CPI-U and the CPI for calendar year 2016 means the average

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of such amounts as of the close of the 12-month period ending on August 31, 2016.
Section 280F(d)(7)(B)(ii) defines the term "C-CPI-U automobile component" as the
automobile component of the Chained Consumer Price Index for All Urban Consumers
as described in § 1(f)(6). The product of the October 2017 CPI new vehicle component
(144.868) and the amount determined under § 1(f)(3)(B) (0.694370319) is 100.592.
The new vehicle component of the C-CPI-U released in November 2024 was 123.153
for October 2024. The October 2024 C-CPI-U new vehicle component exceeded the
product of the October 2017 CPI new vehicle component and the amount determined
under § 1(f)(3)(B) by 22.561 (123.153 - 100.592). The percentage by which the C-CPI-
U new vehicle component for October 2024 exceeds the product of the new vehicle
component of the CPI for October of 2017 and the amount determined under
§ 1(f)(3)(B) is 22.428 percent (22.561/100.592 x 100%), the automobile price inflation
adjustment for 2025 for passenger automobiles. The dollar limitations in § 280F(a) are
therefore multiplied by a factor of 0.22428, and the resulting increases, after rounding to
the nearest $100, are added to the 2018 limitations to give the depreciation limitations
applicable to passenger automobiles for calendar year 2025. This adjustment applies to
all passenger automobiles that are placed in service in calendar year 2025.
(2) Amount of the limitation. Tables 1 and 2 of this revenue procedure contain the
depreciation limitation for each taxable year for passenger automobiles a taxpayer
placed in service during calendar year 2025. Use Table 1 for a passenger automobile
to which the § 168(k) additional first year depreciation deduction applies that is acquired
by the taxpayer after September 27, 2017, and placed in service by the taxpayer during
calendar year 2025; use Table 2 for a passenger automobile for which no § 168(k)

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additional first year depreciation deduction applies.
REV. PROC. 2025-16 TABLE 1

DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES ACQUIRED
AFTER SEPTEMBER 27, 2017, AND PLACED IN SERVICE DURING CALENDAR
YEAR 2025, FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION
DEDUCTION APPLIES

Tax Year Amount
1st Tax Year $ 20,200
2nd Tax Year $ 19,600
3rd Tax Year $ 11,800
Each Succeeding Year $ 7,060

REV. PROC. 2025-16 TABLE 2

DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES
PLACED IN SERVICE DURING CALENDAR YEAR 2025 FOR WHICH NO § 168(k)
ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES

Tax Year Amount
1st Tax Year $ 12,200
2nd Tax Year $ 19,600
3rd Tax Year $ 11,800
Each Succeeding Year $ 7,060

.02 Inclusions in Income of Lessees of Passenger Automobiles.
A taxpayer must follow the procedures in § 1.280F-7(a) for determining the
inclusion amounts for passenger automobiles with a lease term beginning in calendar
year 2025. In applying these procedures, lessees of passenger automobiles should use
Table 3 of this revenue procedure.

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REV. PROC. 2025-16 TABLE 3

DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2025

Fair Market
Value of
Passenger
Automobile
Over

Fair Market
Value of
Passenger
Automobile
Not Over

1
st
Tax
Year
During
Lease

2
nd
Tax
Year
During
Lease

3
rd
Tax
Year
During
Lease

4
th
Tax
Year
During
Lease

5
th
Tax
Year
During
Lease &
Later

62,000 64,000 13 26 36 43 50
64,000 66,000 25 53 78 92 107
66,000 68,000 38 81 118 142 163
68,000 70,000 50 109 159 191 220
70,000 72,000 63 136 201 240 277
72,000 74,000 76 164 241 289 334
74,000 76,000 88 192 282 338 391
76,000 78,000 101 219 324 387 447
78,000 80,000 113 247 364 437 504
80,000 85,000 135 295 437 522 604
85,000 90,000 167 364 539 646 745
90,000 95,000 198 434 641 768 888
95,000 100,000 230 502 744 892 1,029
100,000 110,000 277 606 898 1,076 1,242
110,000 120,000 340 744 1,103 1,322 1,525
120,000 130,000 403 882 1,308 1,568 1,809
130,000 140,000 466 1,021 1,512 1,814 2,093
140,000 150,000 529 1,159 1,717 2,060 2,377
150,000 160,000 592 1,297 1,923 2,305 2,661
160,000 170,000 655 1,435 2,128 2,551 2,945
170,000 180,000 718 1,573 2,333 2,797 3,229
180,000 190,000 781 1,711 2,538 3,043 3,513
190,000 200,000 844 1,850 2,742 3,289 3,797
200,000 210,000 907 1,988 2,948 3,534 4,081
210,000 220,000 970 2,126 3,153 3,780 4,364
220,000 230,000 1,033 2,264 3,358 4,026 4,648
230,000 240,000 1,096 2,402 3,563 4,272 4,932
240,000 and over 1,159 2,540 3,768 4,518 5,216

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SECTION 5. EFFECTIVE DATE
This revenue procedure applies to passenger automobiles placed in service during
calendar year 2025 or with a lease term beginning in calendar year 2025.
SECTION 6. DRAFTING INFORMATION
The principal author of this revenue procedure is Knolan Smith of the Office of
Associate Chief Counsel (Income Tax & Accounting). For further information regarding
this revenue procedure, contact Mr. Smith at (202) 317-7005 (not a toll-free number).