Save on taxes: Bonus depreciation for business vehicle purchase

If you replaced commercial vehicles in 2026, or you are planning to before year-end, you may be able to save money on taxes based on what you purchased and when. In this article, we walk you through bonus depreciation for vehicles purchased in 2026 for your small or large business fleet. Bonus depreciation is a tax incentive that allows businesses to immediately deduct the cost of qualifying assets, instead of over time.

Tax deductions if you have a fleet of commercial vehicles

Are you a small or large business owner with commercial vehicles, or a fleet manager? Are you just getting your business started, or a seasoned business owner looking to grow your business? Calculating your commercial vehicle spend and how it will be impacted at tax time, including mileage and leasing, can make a huge difference in your overall expenses. Rather than taking the traditional vehicle depreciation over time, business owners and fleet managers can take immediate deductions during tax season.

If your business purchases a vehicle or truck in 2026, tax codes may allow you to get your total tax break up front instead of spreading the deduction out over the life of your vehicle or asset. Talk to your tax advisor about the options available to your business.

What are the differences between Section 179 and bonus depreciation?

The One Big Beautiful Bill Act (OBBBA) permanently reinstated 100% bonus depreciation, as initially created by the Tax Cuts and Jobs Act (TCJA), for vehicles purchased and placed in service after January 19, 2025. That means the 100% rate carries through 2026 and is no longer scheduled to phase down.

Section 179 limits the annual deduction you can take. For 2026, the maximum Section 179 expense deduction is $2,560,000, and the deduction begins to phase out once total qualifying purchases exceed $4,090,000. Bonus depreciation, on the other hand, has no annual limit on the amount of deduction you can take.

For vehicles placed in service between January 1, 2025, and January 19, 2025, the bonus percentage is 40%. You report these purchases to the IRS on Form 4562.

Section 179 deductions are also limited by how much your business made during the tax year. A business cannot deduct more money than it made. Bonus depreciation does not have this limit.

Section 179 allows taxpayers to deduct a set dollar amount. With bonus depreciation, taxpayers deduct a percentage (100%). 

Section 179: main points and limitations

• There is a yearly deduction limit of $2,560,000 under Section 179 for 2026, phasing out dollar-for-dollar above $4,090,000 in purchases and fully phased out at $6,650,000.
• Businesses must show a profit or positive income at the end of the year.
• Vehicles must be purchased and placed in service before December 31.
• For heavy SUVs, pickups, and vans, the vehicle must exceed 6,000 lbs. in gross vehicle weight (GVW) to qualify. To determine weight, the IRS looks at the Gross Vehicle Weight Rating, typically on the driver’s door jamb.
• There is a deduction cap for heavy SUVs: $32,000 for 2026, up from $31,300 in 2025, for SUVs with a GVWR between 6,001 and 14,000 lbs.
• For vehicles over 14,000 lbs., 100% of the purchase price may be deducted rather than being subject to the limitations assigned to IRS Section 179 vehicles.
• Vehicles, fleet trucks, and vans must be used for more than 50% of your business activity.
• Used vehicles may qualify — they just must be new to you.

For more information, please consult your Tax Advisor(s) and IRS Publication 946.

Bonus Depreciation: main points and limitations

Businesses can take advantage of tax savings when bonus depreciation is taken into account. Bonus depreciation allows you to deduct the cost of your commercial vehicles from your taxable income. Here are some important points to consider:

• There is no maximum amount and no limit on purchases. You can deduct your entire asset or vehicle fleet regardless of how much you paid for the vehicles.
• Bonus depreciation is at 100% for 2026.
• Businesses do not have to show positive income.
• The vehicle must be driven for at least 50% of the time for business purposes.
• The vehicle must be used within the United States.
• The vehicle cannot be used for hire, like a car rental service.
• The taxpayer claiming the deductions must be the owner of the vehicle.
• Delivery vehicles qualify.
• Specialty-use vehicles qualify.

Bonus depreciation is reported on IRS Form 4562. 

Your business commercial vehicle fleet or work vehicles with limited personal use can qualify. Examples include delivery vehicles, cargo vans, and box trucks without passenger seats, as well as specialty vehicles like an ambulance or a hearse. Vehicles can be new or used, and can be financed by a dealership or bank.

Benefits of using bonus depreciation

Unlike Section 179, bonus depreciation has no cap. You can deduct the entire amount of your vehicle purchases without limitation. On top of that, bonus depreciation has no restriction based on your annual business income.

You may be able to use both Section 179 and bonus depreciation in the same year. Consult your tax professional for more information.

Vehicle write-offs:

If a taxpayer does not claim bonus depreciation, the greatest allowable depreciation deduction for a passenger automobile placed in service in 2026 is:

• $12,300 for the first year
• $19,800 for the second year
• $11,900 for the third year
• $7,160 for each later taxable year in the recovery period

If a taxpayer claims 100% bonus depreciation, the greatest allowable depreciation deduction is:

• $20,300 for the first year
• $19,800 for the second year
• $11,900 for the third year
• $7,160 for each later taxable year in the recovery period

Fleet commercial vehicle expenses for tax deductions

Understanding the best way to expense the vehicles in your small or large business fleet can mean significant savings on taxes. In addition to vehicle depreciation, it is important to consider mileage deduction and buying versus leasing when looking at overall tax savings for your business.

Keeping good records, including business mileage and other expenses, is essential for any business taking tax deductions. You can decide whether to use the standard mileage rate or actual costs to get the best advantage. As a general rule, the standard rate makes the most sense for economical vehicles, whereas actual cost is preferred if there are high operating expenses, such as repairs, tires, and gas.

Mileage deductions on your fleet of commercial vehicles: standard rate vs. actual costs

For the 2026 tax year, the standard mileage rate started at 72.5 cents per mile for travel between January 1 and June 30, then increased to 76 cents per mile for travel on or after July 1, 2026, reflecting a rare midyear adjustment by the IRS for rising vehicle operating costs. It is important to keep a record of the total number of miles driven over the year, and the total miles driven for business purposes only, applying the correct rate to the correct period. Keeping a written log of mileage used for business daily, or downloading a mileage app on your smartphone, are easy ways to track your miles. Fleet cards can make it easy to keep track of mileage, too.

Some other vehicle deductions that may qualify include turnpike tolls, parking fees, registration fees, and auto loan interest.

Deduction for depreciation or “wear and tear” on your fleet

Whether you are self-employed or an employee, you may be able to take a deduction for the wear and tear on vehicles.

Most businesses allow employees who use their personal vehicle for work purposes to submit a reimbursement request form that itemizes their expenses. This requires comprehensive record-keeping by your drivers. Refer to the IRS Business Use of Car section of their site for more details.

Special considerations for leasing a commercial vehicle for your fleet

If you lease a vehicle and use it solely for work purposes, you can deduct the lease payment from your taxable income when you calculate your taxes at year’s end. If you lease a vehicle and use it for both personal and business purposes, you can deduct the business portion of the lease payment, but not the time spent in the vehicle for personal use.

There is also an income inclusion rule to even out the tax benefits between leasing and owning. If the fair market value (FMV) of a leased vehicle is above a certain amount, the lessee may have to report additional income. This usually only affects those who have leased luxury vehicles, and is designed to limit the tax benefits for expensive cars. The amount of your car expense that you can deduct will, of course, depend on how much you use your vehicle or truck for business. A fee, or “inclusion amount,” is a fixed dollar amount issued by the IRS that will reduce the amount you can deduct, in some cases. See IRS Publication 463, Travel, Gift, and Car Expenses.

The big picture: your total commercial vehicle fleet costs

If you are a fleet manager or business owner with more than one vehicle or truck, your fleet management costs can make up a large portion of your operating budget. From licenses and permits to monthly payments and depreciation, the ongoing costs can have a huge impact on your overall bottom line. Other indirect costs, like fuel, parts replacement, regular maintenance, parking fees, and tolls, can add up quickly.

Capitalizing on these direct and indirect vehicle and fleet expenses can mean large savings at tax time. In addition, by looking at the big picture with a trusted tax consultant, you can figure out ways to increase your fleet efficiency during the year. From managing your fuel expenses with a fleet card to examining your yearly maintenance costs, you can begin to proactively plan for the upcoming year’s expenses.

Federal government tax incentives can also help you right-size your fleet to ensure the best use of every truck or vehicle you have on the road. Are they all working to your best advantage, or are some under-utilized and only an added expense? Looking at the big picture of your fleet management cost every year will help you streamline your small business operations and expenses.

Making the most of your 2026 tax deductions

Whether you are a business manager or owner, self-employed and working on your own, or a fleet management company, the way you expense your work vehicle or truck can make a huge difference when filing your taxes. To use the Section 179 deduction and bonus depreciation to lower your tax bill, you must finalize any vehicle purchases before the end of the calendar year, and you must use that vehicle during the tax year in question.

Making the most of your vehicle or fleet expenses, including mileage and leasing, can help your new business get off to a great start, or help a seasoned business grow and thrive. Rather than taking the traditional vehicle depreciation over time, business owners can now take an immediate deduction.

Whether you need to increase the number of vehicles in your fleet or buy a new or pre-owned commercial truck for yourself, the advantages of making these purchases before the end of the year can benefit you at tax filing time.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your tax, legal and accounting advisors before engaging in any transaction.

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Resources:
IRS
U.S. Bank
Thomson Reuters
Jackson Hewitt
Millan + Co.
Drivers Note

Editorial note: This article was originally published on December 11, 2020, and has been updated for this publication.