Can a Real Estate Agent Write Off a Car Purchase?

A real estate agent can write off a car purchase, but almost never in a single stroke. What you actually deduct is the business-use share of the vehicle, recovered either through a per-mile rate or through actual expenses plus depreciation. For a standard passenger car placed in service in 2026 and used entirely for business, the biggest first-year write-off is $20,300 when bonus depreciation is applied. Buy a vehicle over 6,000 pounds and the ceiling comes off almost entirely.

Your Business-Use Percentage Sets the Ceiling

Every number below scales to how much you actually drive for work. Divide business miles by total miles for the year. Drive 30,000 miles with 21,000 of them for showings, inspections, closings, and lender meetings, and your business-use percentage is 70%. Every deduction figure in this article gets multiplied by that share.

The 50% line is the one to watch. Above it, you have access to bonus depreciation and Section 179 expensing. At or below it, you are limited to straight-line depreciation, which stretches the write-off across more years in smaller pieces.¹

Commuting Doesn’t Count, but a Home Office Changes That

Driving from home to a fixed brokerage office is commuting, and the IRS does not treat it as deductible no matter how long the drive.² There is a real workaround for agents: if you maintain a home office that qualifies as your principal place of business, trips from that office to a showing, a client’s home, or a temporary work location count as business miles. The home office must meet the exclusive and regular use test, meaning a dedicated space used only for real estate work.³ For agents who spend most days on the road, establishing that home office can meaningfully expand deductible mileage.

Pick a Method: Standard Mileage or Actual Expenses

You choose one method the first year the vehicle is in service, and the first-year choice constrains what you can do later. Run both calculations before you commit.

The Standard Mileage Rate

Multiply business miles by the IRS rate. For 2026 that rate is 70 cents per mile, and it covers fuel, insurance, maintenance, and a built-in depreciation component in one figure.⁴ An agent driving 25,000 business miles deducts $17,500 with essentially no paperwork beyond a mileage log.

The catch: with the standard rate, Section 179 and bonus depreciation are off the table. And if you start with the standard rate and later switch to actual expenses, you are locked into straight-line depreciation for the rest of the vehicle’s life.⁵ This method rewards high-mileage agents driving inexpensive, fuel-efficient cars.

The Actual Expense Method

Track every operating cost: fuel, oil, tires, insurance, registration, repairs, and loan interest. Total them, multiply by your business-use percentage, and add depreciation of the purchase price on top. This is the only path to accelerated write-offs of what you paid for the vehicle.

Starting with actual expenses in year one also preserves your flexibility to switch to the standard rate later.⁵ For anyone uncertain which method wins over the long term, that flexibility alone is a reason to start here.

How the Purchase Price Actually Gets Deducted

Under the actual expense method, the car itself is a capital purchase, recovered through depreciation on Form 4562.⁶ Three tools stack together, all capped for passenger vehicles.

Standard MACRS Depreciation

Vehicles are five-year property. Without any accelerated method, first-year depreciation for a 2026 passenger car is capped at $12,300, assuming 100% business use.⁷ These luxury auto limits apply regardless of what the car actually cost and scale down with your business-use percentage. A 70% business-use agent multiplies the cap by 0.70.

Bonus Depreciation

The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025.⁸ For a 2026 passenger car with bonus depreciation applied, the first-year cap rises to $20,300, up from $12,300 without it.⁷ To qualify, you need business use above 50% in the year the vehicle enters service, and you cannot have elected out of bonus depreciation for that property class.

Section 179

Section 179 lets you expense qualifying business property immediately rather than depreciating it. The 2026 overall limit is $2,560,000, with a phase-out starting at $4,090,000 of total property placed in service.⁹ Real estate agents will not hit those ceilings.

For a standard passenger car, the luxury auto caps still apply. Section 179 does not let you exceed the $20,300 first-year limit with bonus depreciation, or $12,300 without. Section 179 becomes powerful only when the vehicle weighs more.

Heavy Vehicles Change the Math

Vehicles with a gross vehicle weight rating over 6,000 pounds are exempt from the passenger car depreciation caps. Large SUVs, full-size pickups, and cargo vans commonly clear that line. Use one for real estate work more than 50% of the time and the ceiling largely disappears.

For SUVs in the 6,000- to 14,000-pound range, the Section 179 deduction is capped at $32,000 for 2026.⁹ After you take Section 179, 100% bonus depreciation applies to the remaining basis, and standard MACRS covers anything left after that. On a $65,000 SUV used entirely for business, first-year deductions can cover most or all of the purchase price.

Pickup trucks with a bed of at least six feet and certain heavy vans are not subject to the $32,000 SUV limit, so the full Section 179 amount can apply. This is why so many agents drive full-size trucks. The vehicle still needs to make sense for actual business use, though. An auditor who sees a luxury SUV with 40% personal use is going to read the mileage log closely.

Leasing Instead of Buying

If you lease, you deduct the business share of your lease payments rather than depreciating a purchase. The IRS requires a lease inclusion amount that reduces the deduction for higher-value vehicles, functioning as the leasing counterpart to the luxury auto caps. For 2026, lease inclusion begins for vehicles with a fair market value above $62,000, and the amounts climb with the vehicle’s value.⁷

Leasing simplifies the paperwork, since Form 4562 is not in the picture. You also never build equity and have nothing to sell at the end. For agents who rotate cars every three years anyway, leasing fits. For those who drive a car until it dies, buying and depreciating it usually produces a better long-run tax result, because depreciation keeps flowing after the loan is paid off.

Recapture When You Sell or Use Drops

Every dollar of depreciation you claim reduces your basis in the car. The IRS wants some of that back when you dispose of the vehicle or when your business use falls off. This is depreciation recapture.

When you sell a vehicle you have been depreciating, any gain up to the amount of depreciation previously claimed is taxed as ordinary income rather than at the capital gains rate.¹⁰ Report the sale on Form 4797.¹¹ A quick example: you bought the car for $50,000 and claimed $30,000 in depreciation, giving you a $20,000 adjusted basis. Sell it for $28,000, and the $8,000 gain is all ordinary income because it falls within the $30,000 already deducted. Agents who front-loaded Section 179 or bonus depreciation should expect a bigger recapture bill when they sell, especially if the vehicle held its value.

Recapture also hits without a sale. If you claimed accelerated depreciation or Section 179 and your business use later drops to 50% or below, you owe recapture tax on the difference between what you actually deducted and what straight-line would have allowed, treated as ordinary income in the year of the drop.¹ Going forward you are limited to straight-line on that vehicle. Agents winding down to part-time work need to plan for this.

Records That Hold Up

Inadequate records are the most common reason vehicle deductions get denied. The burden of proof sits with you.

Keep a mileage log regardless of method. For each business trip, record the date, destination, business purpose, and starting and ending odometer readings, plus your total annual mileage so you can calculate the business-use percentage.² The IRS wants the log to be contemporaneous, meaning kept at or near the time of the trip. A log reconstructed at tax time will not survive scrutiny. GPS-based tracking apps meet the requirement as long as they capture the required fields; the business purpose usually still has to be entered by hand.

The IRS does allow you to keep a detailed log for a representative portion of the year and project the full year from it, if you can show the sample really is representative.² Year-round app tracking is easy enough that sampling feels like a needless risk.

Under the actual expense method, save receipts, invoices, and statements for fuel, repairs, insurance premiums, and registration. The receipts show the expense happened; the log shows the business connection. Hold everything for at least three years from the date you filed the return. If you understated income by more than 25%, the IRS has six years to assess.¹² For a vehicle being depreciated over multiple years, keep the purchase documentation and depreciation schedules until at least three years after the return covering the last year of depreciation, or the year you dispose of the vehicle, whichever is later.

1
Office of the Law Revision Counsel. 26 U.S. Code 280F – Limitation on Depreciation for Luxury Automobiles
2
Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses
3
Office of the Law Revision Counsel. 26 U.S. Code 280A – Disallowance of Certain Expenses in Connection with Business Use of Home
4
Internal Revenue Service. 2026 Standard Mileage Rates
5
Internal Revenue Service. Business Use of Car
6
Internal Revenue Service. About Form 4562, Depreciation and Amortization
7
Internal Revenue Service. Revenue Procedure 2026-15
8
Internal Revenue Service. One, Big, Beautiful Bill Provisions
9
Internal Revenue Service. Revenue Procedure 2025-32
10
Office of the Law Revision Counsel. 26 U.S. Code 1245 – Gain from Dispositions of Certain Depreciable Property
11
Internal Revenue Service. Instructions for Form 4797, Sales of Business Property
12
Internal Revenue Service. How Long Should I Keep Records