Buying a vehicle for your business can be a big expense – but thanks to Section 179 of the IRS tax code, that cost could become a powerful tax deduction. If used properly, the Section 179 vehicle deduction allows business owners to write off all or part of the purchase price of qualifying vehicles used in business operations.
This deduction is especially helpful for small to mid-sized businesses that need trucks, SUVs, vans, or other heavy vehicles for daily work. But it’s important to follow the rules, including those around vehicle weight, usage, and documentation, to stay compliant and maximize the benefit.
This guide explains how Section 179 applies to business vehicles, how it compares to bonus depreciation, what records to keep, and common scenarios that show how this deduction can reduce your tax bill.
Qualifying for Section 179
Section 179 allows a business to deduct the full purchase price of qualifying business equipment – including vehicles – placed in service during the tax year. Instead of depreciating the asset over several years, you can write off the cost immediately.
To qualify, the vehicle must meet these general requirements:
- Used more than 50% for business – You must use the vehicle primarily for business purposes, and the deduction is only based on the business-use percentage.
- Titled in the business’s name – Ideally, the vehicle should be purchased and titled under the business or the business owner using it for work.
- Put into service during the tax year – You must begin using the vehicle before the end of the tax year to qualify for the deduction that year.
| Deduction Type | 2024 Limit | Description |
|---|---|---|
| Maximum Section 179 Deduction | $1,220,000 | Total allowable deduction for qualified equipment and vehicles placed in service during the year. |
| Phase-Out Threshold | $3,050,000 | Deduction begins to phase out dollar-for-dollar above this total amount of equipment purchases. |
| SUV Deduction Limit | $30,500 | Maximum deduction for SUVs with a gross vehicle weight rating between 6,000 and 14,000 pounds. |
Weight Class Rules
The IRS separates vehicles into different categories based on gross vehicle weight rating (GVWR):
- Vehicles under 6,000 lbs GVWR – These qualify for Section 179 but with limits. The deduction may be capped (typically around $12,200 in the first year), and the rest must be depreciated over time.
- Vehicles over 6,000 lbs GVWR and under 14,000 lbs – These are considered “heavy SUVs” and may qualify for a larger deduction – up to $28,900 in 2024 under Section 179.
- Cargo vans, box trucks, and pickups over 6,000 lbs GVWR with business-specific features – These may qualify for 100% deduction under Section 179 if not considered luxury SUVs.
Examples of vehicles commonly used for the full deduction:
- Ford Transit
- Chevy Express
- GMC Sierra 2500
- Ram 2500 or 3500
- Mercedes Sprinter
- Chevy Suburban (if business-use exceeds 50%)
Section 179 vs. Bonus Depreciation
In addition to Section 179, businesses may also be eligible to use bonus depreciation, another method of writing off the cost of business equipment. Understanding the difference between the two is essential for making the most of your deduction.
Section 179:
- Allows immediate deduction up to an annual limit (up to $1.22 million in 2024).
- Business must have taxable income to claim the deduction.
- Business-use must exceed 50%.
- Must choose to apply it; not automatic.
Bonus Depreciation:
- Allows for 60% immediate write-off in 2024 (was 100% in prior years, reducing annually until 2027).
- Can be used to create a loss or reduce income below zero.
- Applies to new and used equipment.
- Doesn’t have an annual limit like Section 179.
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Deduction Limit | $1,220,000 (2024) | No limit |
| Phase-Out Threshold | $3,050,000 (2024) | None |
| Business Income Limitation | Cannot exceed taxable income | Can create a net operating loss |
| Applicability | New and used property | New and used property |
| Election Required | Yes | No |
Many business owners combine both strategies – first applying Section 179, then using bonus depreciation to write off the remaining cost. This can be especially useful for high-cost vehicles or fleets.
Record-Keeping and Usage
To stay compliant and support your deduction in case of an audit, detailed record-keeping is essential.
Here’s what to track:
- Purchase documents – Save the bill of sale, financing agreements, and title.
- Date placed in service – Record the first date the vehicle was used for business.
- Mileage logs – Keep a mileage log showing business vs. personal miles, especially if the vehicle has mixed use. Apps like MileIQ can help automate this.
- Maintenance and operating costs – These may be deductible under other categories and can support business use claims.
- Business justification – Be ready to explain how the vehicle supports your business operations.
If you claim a large deduction for a vehicle and are later audited, the IRS will want to see that the vehicle was actually used for business, and that you followed all rules under Section 179.
Failing to maintain documentation – or dropping below 50% business use in future years – could result in recapture, where previously claimed deductions are added back to taxable income.
Examples and Scenarios
Understanding how the Section 179 vehicle deduction plays out in real-life situations can help clarify when and how to apply it.
Example 1: Heavy SUV for a Contractor
A construction business owner purchases a Chevy Suburban with a GVWR of 7,000 lbs for $75,000. They use it 90% for business in 2024.
- Qualifies for Section 179 up to $28,900 (SUV cap)
- Remainder may qualify for bonus depreciation
- Business deducts roughly $68,400 in the first year, lowering taxable income
Example 2: Pickup Truck Over 6,000 lbs
A landscaping company buys a Ram 2500 for $60,000. It’s used exclusively for business.
- Entire purchase price qualifies for full Section 179 deduction
- Company deducts $60,000 in 2024
- Truck must be used for business over 50% in future years to avoid recapture
Example 3: Sedan Under 6,000 lbs
A real estate agent buys a Toyota Camry for $35,000, used 75% for business.
- Only part of the cost qualifies for Section 179 (limited to ~$12,200)
- Remaining value must be depreciated over 5 years
- Mileage logs are critical to prove business usage
These examples show how vehicle type, usage, and GVWR all impact the deduction amount under Section 179.
Can Leased Vehicles Qualify for Section 179?
A common question among business owners is whether leased vehicles qualify for the Section 179 deduction. The answer depends on the type of lease agreement.
Generally speaking:
- Standard operating leases do not qualify for the Section 179 deduction. With this type of lease, you’re essentially renting the vehicle, not purchasing it. The lease payments may still be deductible as a business expense, but you can’t deduct the vehicle’s full cost under Section 179.
- Capital leases (or lease-to-own agreements) can qualify. If the lease is structured so that you will own the vehicle at the end of the term – such as a $1 buyout lease – the IRS treats it as a purchase for tax purposes. This makes it potentially eligible for Section 179, assuming all other criteria are met.
To determine if your lease qualifies:
- Review the terms of your lease agreement carefully.
- Look for a transfer of ownership clause or an option to purchase the vehicle at the end.
- Confirm the lease is reported on your balance sheet as a liability (capital lease treatment).
If you’re unsure, consult a tax professional. The structure of your vehicle agreement can significantly impact your ability to take deductions – so it’s worth confirming before assuming Section 179 applies.
Need Professional Tax Assistance?
The Section 179 vehicle deduction is one of the most valuable tax-saving tools available to business owners who need vehicles for daily operations. Whether you drive a work truck, operate a service fleet, or simply need a reliable SUV for meetings and site visits, Section 179 can turn your investment into immediate tax relief.
But it’s important to plan ahead, understand the weight and usage requirements, and keep accurate records. Business owners who work with a knowledgeable tax advisor can structure purchases and write-offs in a way that maximizes benefits and minimizes future risk.
At Dimov Tax, we help business owners leverage the tax code to their advantage – from vehicle deductions and equipment purchases to entity structure and long-term strategy.
Contact Dimov Tax today to make sure your next vehicle purchase works as hard for your tax return as it does for your business.