Bonus Depreciation on Used Vehicles: Caps, Heavy Vehicles, and Recapture

Yes, bonus depreciation on used vehicles is available at 100% for vehicles acquired after January 19, 2025 and placed in service in 2026, provided the vehicle is new to your business and meets the IRS acquisition rules. The One Big Beautiful Bill Act, signed July 4, 2025, made the full first-year write-off permanent after it had been phasing down.¹ The catch: Section 280F still caps the annual deduction on lighter passenger vehicles regardless of the bonus rate. Heavy vehicles over 6,000 pounds gross vehicle weight escape those caps, which is where the real money is.

What Makes a Used Vehicle Eligible

The IRS applies five acquisition tests before a used vehicle qualifies for bonus depreciation. The governing idea is “new to the taxpayer”: your business must not have held a depreciable interest in the vehicle previously. Beyond that, the vehicle cannot be acquired from a related party, such as a spouse, a business you control, or a member of your controlled group.²

The remaining three tests catch complex transactions. Your cost basis cannot be determined by reference to the seller’s adjusted basis, ruling out certain related-entity transfers. The vehicle cannot have been inherited (basis determined under Section 1014). And the purchase price cannot include the basis of other property you already held. A straightforward purchase from a dealer or private seller clears all five without issue.

The Business-Use Threshold

You need to use the vehicle more than 50% for business during the first year it’s placed in service. “Placed in service” means ready and available for business use, not necessarily the day you signed the papers. If business use is 50% or less in year one, you lose bonus depreciation entirely and must use straight-line depreciation under the Alternative Depreciation System.³

Your business-use percentage also scales the deduction. A vehicle used 75% for business gets 75% of whatever you’d otherwise claim.

The Section 280F Caps on Lighter Passenger Vehicles

Here’s where the 100% headline runs into reality. Section 280F imposes annual dollar limits on passenger vehicles rated at 6,000 pounds or less. Cars use unloaded gross vehicle weight; trucks and vans use gross vehicle weight.⁴ These limits reach ordinary sedans, crossovers, and small SUVs, not just luxury cars.

For a vehicle placed in service in 2026 with bonus depreciation applied, Rev. Proc. 2026-15 sets the annual caps at:³

First year: $20,300
Second year: $19,800
Third year: $11,900
Each succeeding year: $7,160

Buy a used sedan for $45,000, use it 100% for business, and your first-year deduction is $20,300 despite bonus depreciation supposedly wiping out the whole cost. The remaining $24,700 comes off over subsequent years at the caps above, at $7,160 per year once you’re past year three, until basis is fully recovered. For standard-weight vehicles, the caps neutralize most of the bonus depreciation benefit.

Why Heavy Vehicles Are the Real Opportunity

Vehicles rated above 6,000 pounds gross vehicle weight aren’t “passenger automobiles” under Section 280F, so the annual caps don’t apply.⁴ Many full-size SUVs, pickups, and cargo vans clear the threshold. The gross vehicle weight rating is on the sticker inside the driver’s door jamb.

Heavy SUVs rated between 6,000 and 14,000 pounds have one remaining constraint: the Section 179 expense deduction for SUVs is capped at $32,000 for 2026. But you can stack. After Section 179, the remaining cost basis takes 100% bonus depreciation with no cap.

A $75,000 used SUV placed in service in 2026 with 100% business use: $32,000 under Section 179, then $43,000 of basis fully written off under bonus depreciation, for a $75,000 first-year deduction. On the same $75,000 spent on a lighter vehicle, you’d deduct $20,300.

Vehicles over 14,000 pounds, meaning most large commercial trucks and heavy-duty work vehicles, fall outside the definition of “sport utility vehicle” for Section 179, so the $32,000 SUV cap doesn’t apply. The full cost can go through Section 179 (up to the overall $2,560,000 limit for 2026), bonus depreciation, or a combination.

You Can’t Switch to Standard Mileage Later

Take bonus depreciation, Section 179, or any MACRS depreciation on a vehicle and you permanently lock out the standard mileage rate for that vehicle. The IRS requires you to elect the standard mileage rate in the very first year the car is available for business use if you want to keep that option open.⁵

For a heavy vehicle with high business use, actual expenses with bonus depreciation almost always wins. For a lighter vehicle constrained by Section 280F caps, the standard mileage rate (70 cents per mile for 2025) can produce a larger lifetime deduction, particularly with heavy annual mileage. Run both numbers before you commit. The choice is one-way.

The Recapture Trap

Claiming a large first-year write-off comes with a multi-year obligation. If business use drops to 50% or below in any year during the recovery period, you must recapture the excess depreciation. The recapture amount is the difference between what you actually deducted and what you would have deducted using straight-line depreciation under the Alternative Depreciation System from the start.⁴

That amount gets added to ordinary income in the year business use drops. On a heavy vehicle where you wrote off $75,000 in year one, the recapture hit is substantial. You also switch to straight-line for the rest of the recovery period. Contemporaneous mileage logs matter every year, not just the first.

State Conformity Is a Separate Question

Your federal bonus depreciation deduction may not carry to your state return. A majority of states have historically decoupled from federal bonus depreciation to avoid the upfront revenue loss, requiring an add-back on the state return and a slower depreciation schedule at the state level. Several states have already passed legislation to decouple from the restored 100% rate under the One Big Beautiful Bill Act, and the picture is still evolving. Check your state’s conformity status before assuming the federal write-off flows through.

Trade-Ins Are Two Transactions

Since the TCJA, like-kind exchanges under Section 1031 apply only to real estate, not vehicles.⁶ Trading in an old business vehicle is now treated as a sale of the old vehicle (triggering gain or loss) and a separate purchase of the new one at its full price.

Your depreciable basis in the replacement is the actual purchase cost, not the net after trade-in credit. Buy a $60,000 used SUV, trade in your old truck for $15,000, and your basis in the new vehicle is $60,000. The $15,000 is separately reported as proceeds from disposing of the old vehicle.

How to Report It

Vehicle depreciation and Section 179 deductions go on Form 4562, Depreciation and Amortization.⁷ Vehicles are listed property, reported in Part V. Line 25 captures the special depreciation allowance (bonus) for listed property; lines 26 and 27 report the vehicle details and business-use percentage.⁸ The total flows to Schedule C for sole proprietors, Form 1120 for C-corporations, Form 1120-S for S-corporations, or Form 1065 for partnerships.

Keep the purchase documentation, the mileage log, and any records showing the gross vehicle weight rating. If you can’t substantiate business use, the IRS can disallow the whole deduction, and the burden of proof is on you.

1
Internal Revenue Service. IRS Notice 2026-11 – Interim Guidance on Additional First Year Depreciation Deduction under Section 168(k)
2
Internal Revenue Service. Additional First Year Depreciation Deduction – Bonus FAQ
3
Internal Revenue Service. Rev. Proc. 2026-15 – Passenger Automobile Depreciation Limitations
4
Office of the Law Revision Counsel. 26 US Code 280F – Limitation on Depreciation for Luxury Automobiles; Limitation Where Certain Property Used for Personal Purposes
5
Internal Revenue Service. Topic No. 510, Business Use of Car
6
Internal Revenue Service. Like-Kind Exchanges – Real Estate Tax Tips
7
Internal Revenue Service. About Form 4562, Depreciation and Amortization
8
Internal Revenue Service. Instructions for Form 4562 (2025)