How to Write Off a Vehicle Purchase as a Sole Proprietor

To write off a vehicle purchase as a sole proprietor, you report the deduction on Schedule C using one of two methods: the standard mileage rate (72.5 cents per business mile in 2026) or the actual expense method, which includes depreciation. Whichever method you pick, you multiply eligible costs by the share of miles you drive for business. For a passenger car placed in service in 2026, the first-year write-off tops out at $20,300 when bonus depreciation is claimed. Vehicles over 6,000 pounds gross vehicle weight rating escape that cap, and a qualifying heavy pickup or van used more than 50% for business can be deducted in full in year one.¹

Every dollar you deduct lowers your Schedule C net profit, which cuts both income tax and self-employment tax. Self-employment tax runs 15.3% on net earnings, so a $10,000 vehicle deduction saves roughly $1,530 in SE tax on top of your income tax savings.²

Start With Your Business-Use Percentage

Nothing else about the deduction works until you know what share of the vehicle’s use is business. Drive 15,000 miles in a year with 10,000 for business, and your business-use percentage is 67%. That percentage multiplies against every deductible cost, whether you use the mileage rate or actual expenses.³

Business use has to exceed 50% to claim Section 179, bonus depreciation, or accelerated MACRS depreciation. Fall to 50% or below, and you’re limited to slower straight-line depreciation and may face recapture on prior-year deductions.

The IRS treats commuting as personal, not business. Driving from home to a regular office, studio, or shop is a commute and never deductible, regardless of distance.⁴ Trips between business locations, drives to meet clients, and travel to temporary job sites do count. If you have a qualifying home office as your principal place of business, trips from home to a business destination are deductible from the driveway.

Standard Mileage Rate

The simpler method is to multiply your business miles by 72.5 cents for 2026.⁵ That rate is designed to cover gas, insurance, repairs, depreciation, and wear. You don’t itemize those. Business-related tolls and parking are deductible on top of the mileage rate.³

You have to elect the standard mileage rate in the first year you place the vehicle in service for business.³ That election preserves your flexibility. You can switch to actual expenses in a later year if your costs climb. It doesn’t work the other way around: once you’ve claimed MACRS depreciation, Section 179, or bonus depreciation on a vehicle, you can’t move that vehicle to the mileage rate.

The mileage rate is unavailable if you run five or more vehicles simultaneously, or for vehicles used for hire like taxis.³

One catch worth knowing before you sell: a portion of each mile you claim is treated as depreciation. For 2026 that’s 35 cents.⁵ It quietly reduces your basis in the vehicle, so heavy business use over several years can push basis to near zero and produce a taxable gain when you sell.

Actual Expense Method

The actual expense method deducts the business-use percentage of every operating cost: gas, oil, tires, repairs, insurance, registration, loan interest, and depreciation.³ Records take more work. Deductions are often larger, especially on expensive vehicles or ones with high operating costs.

Depreciation is usually the biggest line. Vehicles are five-year MACRS property, but for most sole proprietors the real question is how much of the cost can be written off in year one through Section 179 or bonus depreciation.

First-Year Write-Offs by Weight Class

Section 179 lets you deduct the full cost of qualifying business property in the year it’s placed in service. Bonus depreciation, restored to 100% by the One Big Beautiful Bill for property acquired after January 19, 2025, does the same through a separate provision.⁶ Both are reported on Form 4562 with your Schedule C.⁷ How much you can actually write off in year one depends on whether the vehicle sits above or below 6,000 pounds GVWR, which you’ll find on the label inside the driver’s door jamb.

Passenger Vehicles Under 6,000 Pounds

Most cars, sedans, and lighter trucks fall under 6,000 pounds GVWR and are subject to annual depreciation caps that the code calls “luxury automobile” limits even when the car isn’t luxurious.⁸ For 2026, the combined ceiling on Section 179, bonus depreciation, and MACRS is:¹

With bonus depreciation: $20,300 in year one, $19,800 in year two, $11,900 in year three, then $7,160 per year until the cost is fully recovered.
Without bonus depreciation: $12,300 in year one, with the same limits after.

Buy a $50,000 sedan and use it 100% for business, and the bonus depreciation cap lets you write off $20,300 the first year. The rest recovers over the following years at the amounts above, stretching well past the standard five-year MACRS window.

Heavy Vehicles Over 6,000 Pounds

Vehicles over 6,000 pounds GVWR, including many full-size SUVs, pickups, and cargo vans, are exempt from those passenger caps. That exemption is why heavy SUVs are a popular business purchase. With 100% bonus depreciation available, a qualifying heavy vehicle used more than 50% for business can be written off in full the first year. One narrow limit remains: SUVs face a separate Section 179 cap of $32,000 for 2026. Bonus depreciation has no such cap, so the combined first-year deduction on a heavy SUV can still equal the full cost. A heavy pickup or cargo van that isn’t classified as an SUV avoids even the $32,000 restriction.

The threshold is manufacturer GVWR, not curb weight. If the door-jamb label shows 6,001 pounds or more, the vehicle qualifies for the heavy-vehicle treatment.

Leasing Instead of Buying

If you lease the vehicle, you deduct the business-use share of each lease payment as an operating expense on Schedule C. No depreciation, because you don’t own the vehicle. To prevent leasing from becoming a workaround for the passenger caps, the IRS requires lessees of more expensive vehicles to add a “lease inclusion amount” to gross income each year of the lease.⁹ That add-back approximates what depreciation limits would have blocked on a purchase. The pricier the vehicle, the bigger the inclusion. The 2026 table is in Rev. Proc. 2026-15.¹

Records the IRS Requires

Vehicle deductions are among the most frequently challenged items in audits, and documentation is where most claims fail. The IRS wants you to substantiate the amount, time, place, and business purpose of each trip, contemporaneously.³ Reconstructing a year of driving in April doesn’t meet that standard.

For each business trip, log the date, destination, business purpose, and miles driven. Record your odometer at the start and end of each tax year so you can calculate total miles and derive the business-use percentage.

Electronic records are fine, including GPS-based apps, as long as they contain the required information. Spreadsheets, PDFs, and app exports all work. Automated trackers have the built-in advantage of logging in real time.

If you use the actual expense method, keep receipts or statements for every operating cost, each showing amount, date, and vendor.³ Card statements can back up missing receipts but are stronger paired with the underlying receipt. Hold vehicle records for at least three years from the filing date or the return’s due date, whichever is later.¹⁰ Keep depreciation records for at least three years after you report the sale, since the IRS will want the history to verify basis.¹¹

Selling the Vehicle or Dropping Below 50% Business Use

When you sell, the taxable gain is the sale price minus your adjusted basis, which is the original cost minus total depreciation claimed.¹² Buy a truck for $40,000, claim $30,000 in depreciation, sell for $18,000, and the gain is $8,000. That gain doesn’t get capital gains rates. Under Section 1245, gain on depreciable personal property is taxed as ordinary income up to the depreciation previously claimed.¹³ Report the sale on Form 4797.¹⁴

Standard mileage users are on the hook for the same recapture logic. Every business mile claimed reduced your basis by that year’s depreciation component (35 cents for 2026).⁵

If your business use drops to 50% or below in a year after you claimed Section 179, bonus depreciation, or accelerated MACRS, you have to recapture the excess. Recapture equals the difference between what you actually deducted with accelerated methods and what straight-line would have given you over the same period. That difference becomes ordinary income in the drop year on Form 4797, and you switch to straight-line for the remaining recovery period.¹⁴ The exposure is largest when you took a big first-year write-off. If there’s any real chance your business use will slip, the standard mileage rate in year one keeps that door closed.

Clean Vehicle Credits No Longer Available for New Purchases

If you’re planning a business EV or plug-in hybrid purchase now, the credits are gone. Both the new clean vehicle credit and the commercial clean vehicle credit expired for vehicles acquired after September 30, 2025.¹⁵ Vehicles acquired on or before that date but placed in service in 2026 may still claim the credit. No 2026 purchases qualify.

1
Internal Revenue Service. Rev. Proc. 2026-15 – Depreciation Limitations for Passenger Automobiles
2
Internal Revenue Service. Sole Proprietorships
3
Internal Revenue Service. Topic no. 510 – Business Use of Car
4
Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses
5
Internal Revenue Service. 2026 Standard Mileage Rates
6
Internal Revenue Service. One, Big, Beautiful Bill Provisions
7
Internal Revenue Service. About Form 4562, Depreciation and Amortization
8
Office of the Law Revision Counsel. 26 U.S. Code 280F – Limitation on Depreciation for Luxury Automobiles
9
Internal Revenue Service. Rev. Proc. 2025-16 – Depreciation Limitations and Lease Inclusion Amounts
10
Internal Revenue Service. How Long Should I Keep Records
11
Internal Revenue Service. Topic no. 305, Recordkeeping
12
Internal Revenue Service. Topic no. 703, Basis of Assets
13
Office of the Law Revision Counsel. 26 USC 1245 – Gain From Dispositions of Certain Depreciable Property
14
Internal Revenue Service. About Form 4797, Sales of Business Property
15
Internal Revenue Service. Commercial Clean Vehicle Credit