Can I Take Bonus Depreciation on a Vehicle? Caps and Section 179

Yes, you can take bonus depreciation on a vehicle you buy for your business, and the deduction is far more generous than it was under the phase-down schedule the previous law was headed toward. The One, Big, Beautiful Bill Act, signed July 4, 2025, permanently restored 100% first-year bonus depreciation for qualified property acquired after January 19, 2025.¹ The catch is Section 280F. For most passenger cars, the luxury auto limits cap the first-year write-off at $20,300 no matter what you paid.² Vehicles rated above 6,000 pounds gross vehicle weight escape that cap, which is where the real deduction lives.

What 100% Bonus Depreciation Means for a Vehicle Bought in 2026

A vehicle you buy and place in service in 2026 qualifies for 100% first-year bonus depreciation on its full cost basis, subject to the passenger-auto dollar limits below.³ Both new and used vehicles qualify, as long as neither you nor a related party used the vehicle before you bought it.

Acquisition date matters, not just when you start driving for work. A vehicle acquired before January 20, 2025 but placed in service later still follows the older phase-down schedule, which means a bonus rate of only 20% for a 2026 placed-in-service date. For virtually all 2026 purchases, the full 100% rate applies.

You can elect out of bonus depreciation entirely for any class of property.⁴ The election covers everything in that recovery class for the year, not a single asset. Businesses sometimes elect out to spread deductions across future years when current income is low, or to sidestep state conformity issues.

Which Vehicles Qualify

The vehicle has to be used more than 50% for business. Fifty percent or less fails the predominant-use test and disqualifies the vehicle from both bonus depreciation and Section 179 expensing.⁵ Vehicles fall into the 5-year MACRS class, so the “20 years or less” recovery-period requirement is met automatically. And the vehicle has to be placed in service during the tax year you claim the deduction, meaning ready and available for its business use.

Be honest about the business-use percentage. If use drops to 50% or less in a later year after you’ve already taken bonus depreciation, you owe recapture. The difference between what you deducted under MACRS and what you would have deducted under straight-line comes back as ordinary income, reported through Part IV of Form 4562.⁶

The $20,300 Passenger Auto Cap

Section 280F defines a “passenger automobile” as any four-wheeled vehicle made primarily for public roads and rated at 6,000 pounds unloaded gross vehicle weight or less (trucks and vans use gross vehicle weight instead of unloaded weight).⁷ Vehicles meeting that definition face hard annual dollar caps, regardless of cost.

For a passenger vehicle placed in service in 2026 with bonus depreciation applied, the caps are:²

Year 1: $20,300
Year 2: $19,800
Year 3: $11,900
Each succeeding year: $7,160

If bonus depreciation doesn’t apply or you elect out, the year-one cap drops to $12,300. Years two and beyond stay the same.²

Take a $55,000 sedan used 100% for business. On paper, 100% bonus depreciation would let you write off $55,000 in year one. The $20,300 cap overrides that. You deduct $20,300 the first year and chip away at the remaining basis under the annual caps for years to come. For any passenger vehicle costing more than about $20,300, the bonus percentage is almost irrelevant. The cap is what actually controls your deduction.

Heavy Vehicles Over 6,000 Pounds

Vehicles rated above 6,000 pounds gross vehicle weight fall outside the Section 280F definition of “passenger automobile,” so the annual dollar caps simply do not apply.⁷ With 100% bonus depreciation restored permanently, this is where the real tax savings sit.

Buy a qualifying heavy vehicle in 2026, use it 100% for business, and you can deduct the full purchase price in year one. A $75,000 heavy-duty pickup used entirely for a construction business produces a $75,000 first-year deduction. That’s a dramatic gap from the $20,300 cap on lighter vehicles.

Gross vehicle weight rating is the maximum loaded weight the manufacturer specifies. You’ll find it on a label inside the driver’s door jamb. Heavy-duty pickups, full-size vans, and many large SUVs clear 6,000 pounds. Standard sedans, crossovers, and smaller trucks generally don’t. Keep the sales documentation showing the GVWR; the IRS will want to see it.

Heavy SUVs still face one limit, but only on Section 179, not on bonus depreciation. The statute defines an SUV subject to a separate Section 179 cap as a four-wheeled passenger vehicle rated at more than 6,000 but no more than 14,000 pounds GVWR.⁸ The base statutory cap is $25,000, adjusted for inflation. For 2025 it was $31,300.⁹ The 2026 amount is approximately $32,000. Vehicles with a cargo bed at least six feet long (most full-size pickups) are excluded from the SUV definition and face no Section 179 dollar cap at all.

Stacking Section 179 With Bonus Depreciation

Section 179 and bonus depreciation are two different accelerated methods, and you can use both on the same vehicle. Section 179 goes first, then bonus depreciation hits the remaining basis.

The differences matter. Section 179 can’t exceed your business taxable income, so it can’t create or increase a net loss; any disallowed amount carries forward. Bonus depreciation has no income limit and can generate a net operating loss. For a business heading into a loss year, bonus depreciation does the work.

Two common scenarios show how the stacking plays out:

Passenger vehicle under 6,000 pounds: Section 179 first, bonus on what’s left, but the total first-year deduction still can’t exceed $20,300 for 2026. Because the cap controls the outcome, the split between the two methods doesn’t change your bottom line.
Heavy vehicle over 6,000 pounds: Take Section 179 (up to the SUV cap if applicable), then apply 100% bonus depreciation to whatever basis remains. An $80,000 heavy SUV used entirely for business could produce roughly $32,000 of Section 179 plus around $48,000 of bonus depreciation, writing off the full cost in year one.

Section 179 is a deliberate election you control asset by asset. Bonus depreciation is automatic unless you formally elect out for the whole class. Which to prioritize depends on your income, your state’s rules, and how much future-year flexibility you want.

You Can’t Switch to the Standard Mileage Rate Later

Claim bonus depreciation or Section 179 on a vehicle, and you’re locked out of the standard mileage rate for that vehicle permanently.⁵ You have to keep using actual expenses (fuel, insurance, repairs, remaining depreciation) for as long as the vehicle is in business use.

Think that through before filing. The standard mileage rate is simpler and sometimes produces a larger total deduction for high-mileage, low-cost vehicles. Once you go the depreciation route, there is no going back. Run both methods over the expected life of the vehicle before making the call.

Records the IRS Will Ask For

Vehicles are listed property, which means stricter documentation than most business assets.¹⁰ Estimates and reconstructed records don’t cut it. Without adequate records, the deduction is gone.

A contemporaneous mileage log is the standard. For each business trip: date, destination, business purpose, miles driven. Track personal miles too, so you can calculate the business-use percentage. Business miles divided by total miles gives you the percentage to apply to your allowable depreciation.

GPS-based smartphone apps have largely replaced paper logs and are generally accepted, provided they capture the required details. Whatever the format, “contemporaneous” is doing real work in that rule. A log built at year-end from memory falls apart under audit.

Also keep the purchase invoice showing cost and GVWR, documentation of the placed-in-service date, and Form 4562 for every year you claim depreciation.⁶

Recapture When You Sell the Vehicle

Every dollar of depreciation reduces your tax basis, which means a bigger taxable gain later. Business vehicles are Section 1245 property, so gain attributable to prior depreciation is taxed as ordinary income, not at capital gains rates. Recapture is the lesser of total depreciation claimed or gain on the sale.

With 100% bonus depreciation in play, that exposure is real. Deduct the full $65,000 cost of a heavy SUV in year one, sell it three years later for $40,000, and you have $40,000 of ordinary income. The upfront tax savings are real, but part of the benefit reverses at disposition.

Sell at a loss and there’s no depreciation recapture; the loss is deductible as an ordinary business loss. Report the sale on Form 4797, Part III, which walks through the recapture calculation.¹¹ If the vehicle was used partly for personal purposes, only the business-use share of depreciation is subject to recapture.

Leasing Instead of Buying

If you lease rather than buy, you don’t claim depreciation at all. You deduct the business share of lease payments as an operating expense, reduced by an annual “lease inclusion amount” from IRS tables that offsets the benefit for expensive vehicles.² For heavy vehicles over 6,000 pounds, buying almost always beats leasing on tax savings because 100% bonus depreciation with no Section 280F cap produces a first-year deduction leasing can’t match.

State Rules May Not Match Federal

A number of states have historically decoupled from federal bonus depreciation. When a state decouples, you add the bonus depreciation back on your state return and instead claim regular depreciation over the vehicle’s recovery period. The result is a different federal and state basis that follows the vehicle until you sell it, when adjustments become necessary. Check your state’s conformity rules before assuming the full federal deduction flows through to your state return; the wrong assumption here leads to an unexpected state tax bill and possible penalties.

1
Internal Revenue Service. One, Big, Beautiful Bill Provisions
2
Internal Revenue Service. Rev. Proc. 2026-15 – Limitations on Depreciation Deductions for Passenger Automobiles
3
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill
4
Office of the Law Revision Counsel. 26 U.S. Code 168 – Accelerated Cost Recovery System
5
Internal Revenue Service. Topic No. 510, Business Use of Car
6
Internal Revenue Service. About Form 4562, Depreciation and Amortization (Including Information on Listed Property)
7
Office of the Law Revision Counsel. 26 U.S. Code 280F – Limitation on Depreciation for Luxury Automobiles; Limitation Where Certain Property Used for Personal Purposes
8
Office of the Law Revision Counsel. 26 U.S. Code 179 – Election to Expense Certain Depreciable Business Assets
9
Internal Revenue Service. Instructions for Form 4562 (2025)
10
eCFR. 26 CFR 1.274-5T – Substantiation Requirements (Temporary)
11
Internal Revenue Service. Instructions for Form 4797 (2025)