How much does car depreciation get taxed?
Henry Morales
Published Apr 01, 2026
Part A Tangible Assets:
| Asset Type | Rate of Depreciation |
|---|---|
| Motor cars, other than those used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020. | 30% |
| Aeroplanes, Aero Engines | 40% |
How much is car depreciation per year?
Your car’s value decreases around 20% to 30% by the end of the first year. From years two to six, depreciation ranges from 15% to 18% per year, according to recent data from Black Book, which tracks used-car pricing. As a rule of thumb, in five years, cars lose 60% or more of their initial value.
How does depreciation on a car work?
Car depreciation is the difference between how much your car was worth when you bought it and what it’s worth when you sell it. The value of your car goes down over time with the wear and tear of everyday use. So, the more you drive your car, the faster your car’s value will drop (or depreciate).
How long can a vehicle be depreciated?
Under MACRS, automobiles are considered “five-year property,” meaning that unless accelerated depreciation rules such as Section 179 apply, the cost of the vehicle is gradually written off over five years.
What’s the maximum amount you can depreciate a car?
For the year 2018, the maximum amount limit on the depreciation of vehicles through special depreciation allowance was 18,000 dollars. This method could only be used for calculating the vehicle’s depreciation with respect to its business use for the very first year. Special depreciation allowance and some of its major features:
How does depreciation affect the cost of a vehicle?
Car depreciation is an unseen force that impacts every vehicle, whether you buy it new or used. For business owners who drive trucks, vans, cars, or SUVs for the purpose of carrying out business activities get the right to deduct a part of the cost with respect to the price of vehicle purchase from taxes that they are paying.
When to use MACRS to calculate car depreciation?
As a depreciation calculating method, MACRS could only be used if the distance covered by vehicle for business use is more than 50% of the total traveled distance. You can use this method from the second year that is after calculating from section 179 deductions or special depreciation allowance.
When is a higher rate of depreciation applicable?
Higher rate of depreciation is also applicable for second-hand or previously used motor cars or motor vehicles. In case the assessee has any other block of assets under ‘Machinery and Plant’ which is eligible for 30 percent of depreciation then the new motor car shall form part of the block of assets of that block.
