How to Buy a Car Through Your Business and Deduct It

Buying a car through your business means titling, financing, and insuring the vehicle in the company’s legal name rather than your own, so the business owns the asset and pays the expenses. Done correctly, it lets you deduct a large share of the purchase price in the first year through Section 179 and bonus depreciation, plus the ongoing costs of operating the vehicle. Done sloppily, it costs you the deduction, exposes you to personal liability, and can trigger a surprise tax bill when you sell.

The Tax Payoff

Two provisions do most of the work. Section 179 lets you treat the purchase price of qualifying business property as a current-year expense rather than spreading it across many years of depreciation. Bonus depreciation under Section 168(k) adds a first-year write-off on top. The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for property acquired after January 19, 2025, replacing a phase-down that had reduced the rate to 40% under prior law.¹

How much of that write-off you actually get depends on the vehicle’s gross vehicle weight rating (GVWR), which you can read off the manufacturer’s label on the driver’s-side door jamb.

Heavy Vehicles Over 6,000 Pounds

Vehicles with a GVWR above 6,000 pounds are exempt from the Section 280F annual depreciation caps that apply to lighter cars. For an SUV or truck between 6,001 and 14,000 pounds GVWR, Section 179 is capped at $32,000, but you can layer 100% bonus depreciation on top of that for the rest of the cost.²¹ A business buying a $75,000 heavy SUV in 2026 could generally deduct the entire purchase price in the first year. Full-size pickups, large SUVs like the Chevrolet Suburban and Ford Expedition, and many commercial vans meet the 6,000-pound threshold. Cargo vans, box trucks, and other vehicles not designed primarily to carry passengers can qualify for the full Section 179 amount without the $32,000 SUV cap.³

Standard Cars and Small SUVs

If the vehicle’s GVWR is 6,000 pounds or less, Section 280F caps how much depreciation you can claim each year no matter what you paid. For passenger vehicles placed in service in 2025, the first-year cap with bonus depreciation is $20,200, dropping to $19,600 in year two, $11,800 in year three, and $7,060 per year after that.⁴ The IRS adjusts these figures slightly each year, but the pattern is the same: an expensive light passenger car gets written off over many years, not in one shot.

Mileage Rate or Actual Expenses

Once the vehicle is in service, you choose how to deduct operating costs. The standard mileage rate for 2026 is 72.5 cents per business mile, and it covers fuel, insurance, repairs, and depreciation as a bundle.⁵⁶ The actual expense method tracks each cost separately — depreciation, fuel, insurance, repairs, tires, registration, loan interest — and you deduct the business-use percentage.

One decision locks the other. If you claim Section 179 or bonus depreciation in the first year, you must stay on the actual expense method for that vehicle for the rest of its life. You cannot switch to the mileage rate later.

The 50% Business-Use Rule

Section 179, bonus depreciation, and any other accelerated write-off require more than 50% business use. Commuting between your home and a regular workplace does not count. If business use drops to 50% or below, you lose the accelerated deductions and switch to straight-line depreciation over a five-year recovery period.⁷

Worse, if usage falls below the threshold after you’ve already claimed a big first-year deduction, the IRS recaptures the excess — meaning it gets added back to your taxable income the year your usage slipped.⁷ Recapture risk runs throughout the recovery period, generally five years for cars and light trucks.

The IRS also expects a contemporaneous mileage log: date, destination, business purpose, and miles driven for each trip, with a running total.⁶ Weekly summaries work if they cover that week. Without a log, an audit can wipe out the deduction entirely.

Paperwork to Bring to the Dealership

A business purchase needs more than a driver’s license and a check. Gather these before you shop:

Employer Identification Number (EIN) from the IRS.⁸
Articles of Organization or Incorporation, filed with the state, proving the entity exists.⁹
A corporate resolution or member authorization naming a specific person authorized to sign for the entity. Many dealerships will not close the sale in the business name without it.⁹
A certificate of good standing from your Secretary of State, confirming the business is current on filings. Some lenders require it.

Check the purchase agreement, title application, and every financing document before signing. The business’s exact legal name and registered address should appear on all of them, not your personal name.

Commercial Financing

Business vehicle purchases use commercial auto loans. Lenders look at the business’s credit history, revenue, and time in operation to set rates and terms. Newer businesses tend to face higher rates or shorter payoff periods.

Most small business auto loans require a personal guarantee from the owner. If you sign one, you agree to repay the loan from your own assets if the business can’t. A default reaches your personal savings, real estate, and credit score. When multiple owners guarantee the loan, joint and several liability lets the lender pursue any one of you for the full balance rather than a proportional share. Some lenders offer unsecured commercial financing without a personal guarantee for established businesses with strong credit and substantial revenue, but expect tougher qualification and higher rates.

Commercial Auto Insurance

A vehicle titled to a business must be insured under a commercial auto policy. Personal auto policies generally exclude vehicles titled to a corporation or LLC, or vehicles used primarily for business — running one on a personal policy can leave you uncovered when a claim actually hits.

Commercial policies carry higher liability limits, commonly $500,000 to $1,000,000 or more, to protect business assets from accident lawsuits. The business needs to appear as the named insured on the declarations page so the policy matches the title. Premiums vary widely by vehicle type, industry, driver record, and coverage limits, running from a few thousand dollars a year to well over $10,000.

Registration and Title

To register and title the vehicle in the company’s name, submit the signed title application, bill of sale, and proof of commercial insurance to your state’s motor vehicle agency. Dealerships usually handle this step; for a private-party purchase, you file it yourself. Fees vary by state and typically depend on weight, type, and intended use, with additional charges for commercial classification in some states. The state issues a title showing the business as owner of record and any lender as lienholder. Keep the title, registration, insurance declarations page, and purchase agreement in your business records for future refinancing, claims, or resale.

Personal Use Is Taxable

Any personal driving of a business-owned vehicle — including commuting — is a taxable fringe benefit. The value has to be added to the user’s W-2 wages and is subject to income and employment taxes.¹⁰

The IRS allows three main valuation methods:¹⁰

Cents-per-mile rule: multiply the IRS standard mileage rate by personal miles driven. Best when personal use is low.
Commuting rule: value each one-way commute at $1.50, available only when the employer requires commuting in the vehicle for a legitimate business reason and has a written policy against other personal use.
Lease value rule: use the IRS annual lease value table based on the vehicle’s fair market value when first made available, then multiply by the percentage of personal miles.

Failing to report personal use can bring penalties for underdepositing employment taxes. This applies even to a sole owner of an LLC or S corporation driving the only company vehicle. The cleanest approach is to keep personal use minimal and log every business trip.

What Happens When You Sell

Depreciation recapture catches many owners off guard. Under Section 1245, when you sell a depreciated business vehicle for more than its adjusted basis (original cost minus accumulated depreciation), the gain attributable to the depreciation you claimed is taxed as ordinary income rather than at capital gains rates.¹¹ Only gain above the original purchase price may qualify for capital gains treatment.

Say you bought a truck for $60,000 and wrote off the full $60,000 in depreciation, leaving an adjusted basis of zero. If you later sell it for $25,000, the entire $25,000 is ordinary income because it sits within the depreciation you already deducted. You report the sale on Form 4797.¹²

The larger the first-year deduction, the larger the potential recapture later. You still benefit from deferring tax in the meantime, but plan on the sale being taxable and price the after-tax result into how long you keep the vehicle.

1
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill
2
Internal Revenue Service. Revenue Procedure 2025-32
3
Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
4
Internal Revenue Service. Revenue Procedure 2025-16
5
Internal Revenue Service. IRS Notice 26-10 – 2026 Standard Mileage Rates
6
Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses
7
Internal Revenue Service. Instructions for Form 4562
8
Internal Revenue Service. Employer Identification Number
9
U.S. Small Business Administration. Register Your Business
10
Internal Revenue Service. Publication 15-B – Employers Tax Guide to Fringe Benefits
11
Office of the Law Revision Counsel. 26 USC 1245 – Gain From Dispositions of Certain Depreciable Property
12
Internal Revenue Service. Instructions for Form 4797 – Sales of Business Property