A business vehicle qualifies for 100% bonus depreciation if you use it more than 50% for business and placed it in service after January 19, 2025. That covers cars, SUVs, pickups, and vans, whether new or used. How much of the cost you can actually deduct in year one depends almost entirely on the vehicle’s gross vehicle weight rating: heavy vehicles above 6,000 pounds generally escape the annual dollar caps, while lighter passenger cars run into them. The One, Big, Beautiful Bill Act, signed July 4, 2025, made the full first-year write-off permanent for qualifying property acquired after the January 19 cutoff.1Internal Revenue Service. One, Big, Beautiful Bill Provisions
Vehicles acquired before that date still follow the older phase-down schedule that had bonus depreciation dropping from 100% to zero between 2023 and 2027.2Internal Revenue Service. Tax Cuts and Jobs Act – A Comparison for Businesses A vehicle purchased and placed in service in 2024, for example, is stuck at the 60% rate that applied that year, no matter when you file.
The 50 Percent Business-Use Rule
Bonus depreciation is off the table if business use is 50% or less. At that level, you must depreciate the vehicle using the slower straight-line method over a longer recovery period.3Office of the Law Revision Counsel. 26 USC 280F – Limitation on Depreciation for Luxury Automobiles Regular depreciation based on your actual business-use percentage is still available, but the first-year acceleration disappears.
Business use is calculated by dividing business miles by total miles driven during the year. Commuting between home and a regular workplace does not count. You need a contemporaneous mileage log recording the date, destination, business purpose, and miles for each trip. That percentage feeds directly into Form 4562, which uses it to reduce the depreciable basis.4Internal Revenue Service. Instructions for Form 4562 – Depreciation and Amortization
A few categories of vehicles are exempt from both the 50% test and the dollar caps discussed below. Delivery trucks with seating only for the driver, trucks and vans permanently modified with built-in shelving or specialized equipment mounts, taxis, rideshare cars, and freight trucks used to transport people or property for hire are not treated as passenger automobiles for depreciation purposes.5Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
Weight Decides the Size of Your Deduction
The gross vehicle weight rating (GVWR) is the maximum loaded weight the manufacturer says the vehicle can safely carry, listed on the safety certification label on the driver’s side door jamb. The IRS uses 6,000 pounds as the dividing line.
Heavy Vehicles Over 6,000 Pounds
Full-size SUVs, large pickups, and cargo vans with a GVWR above 6,000 pounds are not classified as passenger automobiles, so the annual luxury auto caps do not apply.5Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses With 100% bonus depreciation restored, the entire cost can generally be deducted in the first year, limited only by your business-use percentage.
An $80,000 heavy SUV used 90% for business produces a first-year bonus depreciation deduction of $72,000. Drop business use to 60%, and the same vehicle yields $48,000.
One caveat applies if you route the write-off through Section 179 instead of bonus depreciation. SUVs rated between 6,001 and 14,000 pounds and designed primarily to carry passengers are capped at $32,000 in Section 179 expensing for 2026.6Internal Revenue Service. Rev. Proc. 2025-32 The cap doesn’t apply if the vehicle meets any of these tests:
- An open or cap-enclosed cargo bed at least six feet long that is not directly accessible from the passenger compartment.
- Seating for more than nine passengers behind the driver.
- A fully enclosed driver and cargo area with no seating behind the driver and no body section extending more than 30 inches ahead of the windshield.
Pickup trucks with beds at least six feet long and full-size cargo vans typically clear one of these exceptions and avoid the $32,000 cap.4Internal Revenue Service. Instructions for Form 4562 – Depreciation and Amortization And because bonus depreciation itself has no SUV cap, most buyers of qualifying heavy SUVs get more mileage out of bonus depreciation than Section 179 on the SUV portion of their purchases.
Light Vehicles at 6,000 Pounds or Less
Passenger cars and smaller SUVs at or below 6,000 pounds GVWR are treated as passenger automobiles and hit annual dollar caps regardless of purchase price.5Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses Even with 100% bonus depreciation available, you cannot deduct more than the cap in year one.
For vehicles placed in service in 2025 (the most recent published figures), first-year limits are $20,200 with bonus depreciation ($12,200 base plus $8,000 bonus allowance) and $12,200 without.7Internal Revenue Service. Rev. Proc. 2025-16 The IRS adjusts these annually for inflation, and 2026 figures had not been released at the time of writing.
Business use trims the cap further. If the first-year limit is $20,200 and business use is 80%, the actual deduction is $16,160. Anything you couldn’t write off in year one carries forward and stays subject to the caps in later years.
Used Vehicles and Related-Party Purchases
Bonus depreciation applies to both new and pre-owned vehicles. A used vehicle qualifies as long as:8Internal Revenue Service. Additional First Year Depreciation Deduction (Bonus) – FAQ
- You or your business have never used it before.
- You did not buy it from a spouse, parent, child, or a corporation or partnership you control.
- Your basis is not carried over from the seller’s basis, as happens with gifts and certain transfers.
- You did not inherit it from a decedent’s estate.
The vehicle also has to be placed in service during the tax year, meaning it is actually available and ready for its business use. A truck you paid for on December 30 but that still sits on the dealer’s lot on December 31 does not count for that year.
Clean Vehicle Credits Reduce the Basis
Claiming the federal clean vehicle credit on a business EV or plug-in hybrid reduces the vehicle’s depreciable basis by the credit amount. You cannot deduct the full purchase price and pocket the full credit; the statute prevents doubling up.9Office of the Law Revision Counsel. 26 USC 30D – Clean Vehicle Credit A $7,500 credit means you subtract $7,500 from cost before computing bonus depreciation.
What You May Owe Back Later
A large first-year deduction sets up two recapture risks for as long as you own the vehicle.
Business Use Falls to 50 Percent or Below
If your business use drops to 50% or below in a year after you claimed bonus depreciation, you have to add back the difference between what you deducted under the accelerated method and what straight-line would have allowed. That amount is reported as ordinary income in the year use drops, and you switch to straight-line for the remaining useful life.3Office of the Law Revision Counsel. 26 USC 280F – Limitation on Depreciation for Luxury Automobiles
Selling the Vehicle
When you sell a business vehicle for more than its adjusted basis, the gain up to the total depreciation you claimed is taxed as ordinary income under Section 1245, not at capital gains rates.10Internal Revenue Service. Publication 544, Sales and Other Dispositions of Assets Any gain beyond that is Section 1231 gain. Report the sale on Form 4797.11Internal Revenue Service. Instructions for Form 4797 – Sales of Business Property
Because bonus depreciation can zero out a vehicle’s basis in year one, selling soon after almost always triggers recapture. Deduct $60,000, sell two years later for $40,000, and the full $40,000 is ordinary income.
State Rules Often Differ
Roughly 20 states require businesses to add back some or all of federal bonus depreciation when calculating state taxable income. Some states allow the added-back amount to be recovered over several future years; others provide no offset at all. Conformity approaches vary: some states automatically follow federal changes, while others lock in the federal code as of a specific date and may decline to update. A $60,000 federal deduction can produce little or no state-level benefit depending on where you file.
Bonus Depreciation vs. Section 179
Section 179 and bonus depreciation both allow first-year expensing and can be used together, but they behave differently in a loss year. Section 179 cannot create or increase a net business loss; it is capped at taxable income from your active trades or businesses. Bonus depreciation has no such income limit and can generate or deepen a net operating loss you carry forward. If your business is unprofitable, bonus depreciation is generally the more useful tool. For 2026, the Section 179 maximum is $2,560,000, with the benefit phasing out once total equipment purchases exceed $4,090,000.6Internal Revenue Service. Rev. Proc. 2025-32
How to Claim It
Bonus depreciation is claimed on IRS Form 4562, filed with your annual return. Sole proprietors attach it to Schedule C; partnerships and S corporations file it with Form 1065 or Form 1120-S and pass the deduction through on Schedule K-1.4Internal Revenue Service. Instructions for Form 4562 – Depreciation and Amortization
Hold onto the purchase receipt, the window sticker or manufacturer specs showing GVWR, and your mileage log. General recordkeeping guidance calls for at least three years after filing, and up to seven years if you claim a loss from worthless securities or bad debt in the same period.12Internal Revenue Service. How Long Should I Keep Records Because recapture stays a live issue for the entire time you own the vehicle, keep the mileage log going for the whole ownership period, not just the year you took the deduction.