Business Vehicle Deduction
A vehicle used for business is deductible by either the IRS standard mileage rate or the business share of actual costs, whichever is larger, as long as a log supports it. For a heavy SUV bought for the business, 100% bonus depreciation can move most of the purchase price into the first year's deduction.
Reviewed by Ebot Mbi, CPA, EA · Last reviewed October 9, 2026
Who it fits
- Owners who drive to clients, job sites, or between business locations
- Businesses buying a pickup, cargo van, or SUV over 6,000 pounds gross vehicle weight rating
- S-corporation owners who want the company to own or reimburse the vehicle
- Anyone with high business mileage in an inexpensive car, where the mileage rate often wins
Who it's not for
- Commuting between home and a regular office; that is personal mileage
- Owners who will not keep a mileage log
- Vehicles used 50% or less for business, which cannot use bonus or §179 expensing
How it works
The standard mileage rate is set by the IRS each year and covers gas, maintenance, insurance, and depreciation. You add parking and tolls. To keep the option of using it, you must choose it in the first year the vehicle is used for business.
The actual-cost method deducts the business percentage of fuel, insurance, repairs, registration, lease payments or depreciation, and loan interest. Business percentage comes from your log: business miles divided by total miles.
Passenger vehicles under 6,000 pounds gross vehicle weight rating are subject to annual depreciation caps that are indexed for inflation each year. SUVs, pickups, and vans over 6,000 pounds are not.
For a heavy SUV, §179 expensing is limited to a separate SUV cap that is indexed for inflation. Bonus depreciation, now 100% and permanent for property acquired after January 19, 2025, has no SUV cap and can cover the business share of the cost.
Every method requires contemporaneous records: date, destination, business purpose, and miles. Without a log, the deduction is at risk in full.
Illustrative example
Illustrative: a business owner in the 37% bracket buys a new SUV with a 6,500-pound gross vehicle weight rating for $90,000 and places it in service in 2026. The mileage log shows 80% business use.
- Business share of cost: $90,000 × 80% = $72,000
- First-year bonus depreciation at 100%: $72,000
- Federal tax deferred at 37%: $72,000 × 37% = $26,640
- Personal share not deductible: $90,000 − $72,000 = $18,000
The owner defers about $26,640 of federal tax in the first year; that benefit is recaptured as ordinary income when the vehicle is sold or business use falls to 50% or less.
The rules
| Rule | Citation |
|---|---|
| Vehicle expenses require written substantiation of mileage, dates, and business purpose. | IRC §274(d) |
| Depreciation on passenger vehicles under 6,000 pounds is capped each year, and accelerated methods require more than 50% business use. | IRC §280F(a), (b), (d)(5) |
| §179 expensing for SUVs is limited to a separate inflation-indexed cap. | IRC §179(b)(5) |
| Bonus depreciation is 100% for property acquired after January 19, 2025. | IRC §168(k) |
| Standard mileage rate rules, including the first-year election requirement. | Rev. Proc. 2019-46 |
Watch-outs
- A large first-year deduction is a deferral. Selling the vehicle within a few years brings much of it back as ordinary income.
- If business use drops to 50% or less in a later year, excess depreciation is recaptured.
- Logs reconstructed at audit time are often rejected. Use a mileage app or keep a written log as you go.
- Personal use of a company-owned vehicle by an S-corporation owner is taxable wages and must be reported.
What we do
We compare mileage and actual costs on your real numbers, decide whether bonus or §179 fits your income for the year, and set up company ownership or an accountable plan reimbursement for S-corporation owners. We also plan the sale year so recapture does not surprise you.
Questions
Can I switch from actual costs to mileage later?
Not for a vehicle where you claimed accelerated depreciation or §179. Choosing mileage in the first year keeps both options open.
Where do I find the gross vehicle weight rating?
On the label inside the driver's door jamb. It is the loaded weight rating, not the curb weight.
Should I buy a vehicle in December to cut this year's tax?
Only if the business needs it. The deduction defers tax; it does not return the cash you spend on the vehicle.