How to Calculate the Section 179 Vehicle Deduction: Caps and Steps

To calculate the Section 179 vehicle deduction, multiply the vehicle’s cost basis by the percentage you use it for business, then deduct the smaller of that figure or the IRS cap for your vehicle’s weight class, subject to a final ceiling equal to your taxable business income. For 2026, the overall Section 179 limit is $2,560,000, the cap on heavy SUVs is $32,000, and passenger cars are held to a much tighter first-year ceiling under separate luxury-auto rules.¹

The Three Numbers You Need

Every Section 179 vehicle calculation starts with the same three inputs: cost basis, business-use percentage, and the cap that applies to your vehicle’s category.

Cost Basis

Your basis is the full cost of acquiring the vehicle and getting it ready for business use, including purchase price, sales tax, delivery charges, and dealer fees. Financing does not change this number. If you finance the purchase, your basis is the full sticker cost, not just the down payment.

A trade-in does not reduce basis either. Since the Tax Cuts and Jobs Act, the IRS treats a trade-in as two separate transactions: a sale of the old vehicle and a purchase of the new one at its full price.²

Business-Use Percentage

Divide business miles by total miles driven for the year. Commuting between home and a regular workplace does not count as business use. You need more than 50% business use to claim Section 179 at all; if the vehicle falls to 50% or below, the deduction is unavailable.³

The IRS expects contemporaneous mileage logs, meaning entries recorded at or near the time of each trip with the date, destination, purpose, and miles.⁴ Reconstructing a log from memory at tax time will not hold up in an audit.

Your Vehicle’s Category

The cap you use depends on the Gross Vehicle Weight Rating (GVWR) printed on the sticker inside the driver-side door frame, and on whether the vehicle is designed primarily to carry passengers. GVWR is the maximum loaded weight assigned by the manufacturer, not the curb weight.⁵ The three categories are:

Passenger automobiles with a GVWR of 6,000 pounds or less. These face the tightest first-year cap.
Heavy SUVs and crossovers with a GVWR over 6,000 pounds but not more than 14,000 pounds, designed primarily to carry passengers. These have a specific SUV cap.
Heavy trucks and vans over 6,000 pounds that are not designed primarily to carry passengers, including pickup trucks with a cargo bed at least six feet long. These qualify for the full Section 179 limit with no vehicle-specific cap.⁵

Both new and used vehicles qualify, as long as the vehicle is new to your business.⁶ Leased vehicles generally do not qualify, because the leasing company owns the vehicle; lease payments are deducted as ordinary business expenses instead.

2026 Deduction Caps

Rev. Proc. 2025-32 sets the following figures for tax years beginning in 2026:¹

Overall Section 179 limit across all qualifying property: $2,560,000.
Phase-out threshold: the limit begins shrinking dollar-for-dollar once total qualifying property placed in service exceeds $4,090,000 and disappears entirely at $6,650,000. This matters only to larger buyers.
Heavy SUV cap: $32,000 for four-wheeled vehicles over 6,000 pounds GVWR (up to 14,000) designed primarily to carry passengers.
Passenger automobile first-year cap: the combined first-year write-off from Section 179, bonus depreciation, and regular depreciation is capped by Section 280F at an inflation-adjusted amount, which was $20,400 for 2024 and has hovered in that range. Check the current-year Revenue Procedure for the exact 2026 figure when you file.⁵

Heavy non-SUV trucks and vans have no vehicle-specific ceiling. The overall $2,560,000 limit is effectively unlimited for a single vehicle purchase.

The Four-Step Calculation

Step 1. Calculate the business basis. Multiply total cost basis by business-use percentage.

Step 2. Identify your category cap. Look up the ceiling for your GVWR class.

Step 3. Take the lesser of the two. Your Section 179 deduction is whichever is smaller. Any leftover business basis is recovered through bonus depreciation and regular depreciation in later years.

Step 4. Apply the taxable income limit. Section 179 cannot exceed your total taxable income from active businesses.⁶ Anything blocked by this ceiling carries forward indefinitely to future years.

Example: Heavy SUV

You buy an SUV with a GVWR of 7,200 pounds for $65,000 and drive it 75% for business.

Business basis: $65,000 × 75% = $48,750.
Applicable cap: $32,000 (heavy SUV).
Section 179 deduction: $32,000 (the lesser figure).
Remaining business basis of $16,750 rolls into bonus depreciation and MACRS depreciation.

Example: Heavy Work Truck

You buy a Ford F-250 with a GVWR of 10,000 pounds and a bed over six feet for $58,000, used 100% for business. Because it is a heavy non-SUV truck, there is no category cap. Business basis is $58,000, and assuming your taxable business income clears $58,000, you deduct the full $58,000 in year one.

Example: Passenger Car

You buy a sedan with a GVWR of 4,500 pounds for $35,000, used 90% for business. Business basis is $31,500. Section 280F caps the combined first-year write-off at roughly $20,000 to $20,400 (subject to the 2026 update), so your deduction is limited to that ceiling.³ The remainder is recovered over the following years on the passenger-vehicle depreciation schedule.

Stacking Bonus Depreciation on Top

Section 179 and bonus depreciation are separate deductions that work together. Section 179 is applied first, and bonus depreciation then applies to whatever business basis remains.⁷ Regular MACRS depreciation absorbs anything left over.

The One Big Beautiful Bill Act, signed in 2025, restored 100% bonus depreciation for qualifying property acquired after January 19, 2025.⁸ Vehicles acquired before that date but placed in service in 2026 get only 20% bonus depreciation.

The stack matters most for heavy SUVs. Take a $75,000 qualifying SUV used 100% for business and acquired after January 19, 2025: claim the $32,000 Section 179 deduction, then apply 100% bonus depreciation to the remaining $43,000, and the full $75,000 is written off in year one. Passenger cars under 6,000 pounds get no such benefit. Section 280F caps the combined first-year figure, and bonus depreciation cannot push past that ceiling.³

The Taxable Income Ceiling

Even a fully qualifying vehicle cannot generate a Section 179 deduction larger than your taxable income from active business operations. The IRS calculates that income before applying the Section 179 deduction, so your pre-deduction business income is the ceiling.⁶ If you run multiple businesses, combine their active income to find the ceiling.

If your business basis is $32,000 but your active business income is only $25,000, your deduction this year is $25,000. The disallowed $7,000 carries forward indefinitely and is deductible in a future year up to that year’s remaining Section 179 allowance.⁹ The benefit is not lost, just delayed.

Watch for Recapture in Later Years

Claiming Section 179 creates an ongoing obligation. You must keep business use above 50% for the full depreciation recovery period, typically five years for vehicles. If business use drops to 50% or below in any year of that period, the IRS requires you to recapture part of the earlier deduction.³

The recaptured amount is the difference between the depreciation you actually claimed (including Section 179) and the depreciation you would have taken under the slower Alternative Depreciation System. That difference is reported as ordinary income on Form 4797, Lines 33 through 35, in the year business use dropped.¹⁰ The recaptured amount also increases the vehicle’s basis, which reduces any taxable gain when you eventually sell or trade it.

Where the Deduction Goes on Your Return

Report the deduction on Form 4562, Depreciation and Amortization.¹¹ Vehicles are “listed property,” so they have their own place on the form. The elected Section 179 cost goes in column (i) of Line 26, in Part V, not on Line 6 of Part I.⁷ Part V also captures the date placed in service, business-use percentage, cost basis, and depreciation method for the remainder. Attach Form 4562 to your Schedule C, Form 1065, Form 1120, or Form 1120-S, depending on your entity type.

Keep the purchase contract, a photo of the door-frame GVWR sticker, and your mileage logs for at least three years after filing.¹² Hold them longer if you claim a loss or underreport income by more than 25%, since the IRS audit window extends in those situations.

1
Internal Revenue Service. Rev. Proc. 2025-32
2
Internal Revenue Service. Tax Cuts and Jobs Act A Comparison for Businesses
3
Office of the Law Revision Counsel. 26 U.S. Code 280F Limitation on Depreciation for Luxury Automobiles
4
Internal Revenue Service. Topic No. 305 Recordkeeping
5
Internal Revenue Service. Publication 463 Travel, Gift, and Car Expenses
6
Office of the Law Revision Counsel. 26 USC 179 Election to Expense Certain Depreciable Business Assets
7
Internal Revenue Service. Instructions for Form 4562
8
Internal Revenue Service. One Big Beautiful Bill Provisions
9
eCFR. 26 CFR 1.179-3 Carryover of Disallowed Deduction
10
Internal Revenue Service. Instructions for Form 4797 Sales of Business Property
11
Internal Revenue Service. About Form 4562 Depreciation and Amortization
12
Internal Revenue Service. How Long Should I Keep Records