How much of the owner's car is deductible: the 20% rule, cost caps, rental and fuel

Chiara, an architect with an Italian VAT number under the ordinary regime, buys a 40,000 € car and expects to write most of it off over the coming years. The tax rules recognise far less: the purchase cost counts only up to 18,075.99 euros, and only 20% of that becomes deductible, 3,615.20 euros over the car's whole life. Knowing this before signing changes the decision.

One article for every motor vehicle

Article 164 of the TUIR, Italy's income tax code, governs every cost of vehicles used in a business or profession: depreciation, leasing, rental, fuel, insurance, road tax, repairs, tolls. It never asks how many kilometres are driven for work. It fixes in advance how much of the cost taxable income may absorb, based on use.

The mechanism has two steps. First you check whether the purchase price exceeds a ceiling, and the part above it is simply disregarded. Then a percentage is applied to the admitted cost and to every running expense. For a car the owner also drives for personal reasons, that percentage is 20 percent.

The four bands of article 164

Letter a) of the first paragraph allows the full amount when the vehicle is meant to be used exclusively as a working asset in the company's own activity, or is assigned to public use. Letter b) allows 20 percent in all other cases. Letter b-bis) raises the share to 70 percent for vehicles given to employees for mixed use.

Still within letter b), the percentage rises to 80 percent for those who work as commercial agents or sales representatives. The second module deals with the 100, 70 and 80 percent bands. Here we focus on the most common case, the owner's or the professional's car, which is also the one the rules treat most harshly.

A ceiling written in lire and converted to euros

The consolidated text published in the Gazzetta Ufficiale still states the limits in lire: the part of the acquisition cost above 35 million is ignored for cars and motor caravans, above 8 million for motorcycles and above 4 million for mopeds. The law allows a ministerial decree to update them, but the text as read shows no such update.

To turn them into euros you use the irrevocable conversion rate of 1,936.27 lire to the euro. Thirty-five million lire become 18,075.99 euros, eight million 4,131.66 euros and four million 2,065.83 euros. The ceiling only affects what the vehicle cost to acquire; running expenses have no euro limit and are only cut by the percentage.

Depreciation year by year

In the accounts, depreciation is worked out on the price actually paid. In the tax return, each yearly charge is scaled down first to the ceiling, then to the percentage: multiply the book charge by the ratio of 18,075.99 euros to the real cost, then by 20 percent. Whatever is left over is added back to profit.

Maximum depreciation charges come from rates set by decree of the Minister of Economy for groups of similar assets, halved in the first year, as article 102 provides. This course does not quote them: read them in the ministerial table for your own sector, which remains the reference to show in an audit.

In the first year the ministerial rate is halved. If the ordinary charge for a car were, hypothetically, 6,000 euros, the year it comes into service would start from 3,000 euros, and only that figure would then go through the ratio to the ceiling and the 20 percent cut.

Rental and leasing

For rental and hire the ceiling applies to the payments: anything above 7 million lire a year for cars and motor caravans, that is 3,615.20 euros, is ignored. For motorcycles the limit is 774.69 euros and for mopeds 413.17 euros. The 20 percent share is then applied to the admitted part of the rent.

Contract-based limits must be scaled to the year. A rental that starts on 1 July covers six months of the tax period, so that year's ceiling is halved. For leasing, the portion of each payment that matches the vehicle's cost above 18,075.99 euros is excluded proportionally, as if the car had been bought outright.

Leasing also carries a duration constraint. For letter b) vehicles, article 102, paragraph 7, spreads the deduction of lease payments over a period no shorter than the depreciation period implied by the ministerial rate. A shorter contract speeds nothing up: the deduction still runs over the minimum period.

Running costs follow the same percentage

The 20 percent share is not limited to the purchase. The first paragraph refers to expenses and other negative items relating to the vehicles, so everything the car costs during the year falls under the same rule. None of these items has a euro ceiling, but none escapes the cut either.

• Compulsory motor insurance and any extra cover on the vehicle
• Annual vehicle road tax
• Routine servicing, repairs and tyres
• Fuel, provided it is paid by card
• Motorway tolls paid for journeys made with the vehicle

It pays to keep a separate ledger for the vehicle. Anyone who books car costs to a dedicated account sees the year-end add-back straight away, instead of rebuilding it invoice by invoice in the days before the filing deadline.

Professionals and the one-vehicle limit

For someone practising an art or profession on their own, the 20 percent deduction is allowed for one vehicle only. A second car stays out, even if it genuinely serves the practice. In simple partnerships and professional associations one vehicle is allowed per partner or associate, and the euro ceilings apply to each of them.

A sole trader running a business does not face this numerical limit, which letter b) reserves for professionals: every mixed-use car follows the 20 percent rule with its own ceiling. The general relevance principle still applies, though. A vehicle with no link at all to the activity is not a business cost, whoever it is registered to.

Fuel: deductible only when paid by card

Paragraph 1-bis makes the deduction of motor fuel conditional on payment made exclusively by credit, debit or prepaid card issued by financial operators subject to the reporting duty of Presidential Decree 605 of 1973. Fuel paid in cash loses deductibility entirely, even the reduced 20 percent share.

The update notes to the article tie the rule to invoices issued from 1 January 2019 for fuel sold at roadside filling stations. Still, it is the means of payment, not the invoice, that decides. A card kept for business use makes life simple: the statement becomes the proof of every deducted refuel.

When the car is sold: a proportional capital gain

When the vehicle is disposed of, the gain or loss does not count in full. Paragraph 2 makes it relevant in the same proportion as tax-deducted depreciation bears to total depreciation booked. The tax system taxes the gain to the extent it recognised the cost: it is a consistency rule, not a reward.

Flat-rate regime, sole trader and SRL: same car, different effects

Under the regime forfettario, Italy's flat-rate scheme, costs are not deducted one by one: income is found by applying the activity's profitability coefficient to turnover, and the substitute tax, 15 percent in the standard case, is charged on that result. However expensive, the flat-rate taxpayer's car does not move taxable income by a single euro.

For an SRL, the Italian limited company, article 164 works exactly the same way, but its weight is measured through IRES at the standard 24 percent rate. Every euro of car expense the tax rules refuse costs 24 cents of tax. For a sole trader or a professional, the effect instead depends on the owner's IRPEF bracket.

The rules for 2026

Everything in this module applies to the 2026 tax year. The Gazzetta Ufficiale notes that article 164 is repealed by Legislative Decree no. 117 of 19 June 2026, part of the reorganisation of tax legislation that takes effect from 2027. For 2026 income the previous text, summarised here, remains the one that counts.