Maximize Your Savings: Leverage Business Vehicle Tax Deductions

If you’re curious about how your company can claim an additional tax deduction, business vehicles are a fantastic way to increase your productivity while writing off the expense. Join the Jim Ellis Commercial team as we explain the current rules of the business tax deduction for vehicle purchases, explore the 6,000-pound Vehicle Tax Deduction worth up to $30,500,¹ and discuss how you can determine the list of vehicles that qualify for Section 179 in 2024.

What Is Bonus Depreciation and the Section 179 Tax Credit for Businesses and Fleet Vehicles?

• Section 179: An IRS code that enables businesses to expense the price of qualifying equipment, including new or used commercial and fleet vehicles, purchased during the tax year the vehicle was put into service.
• Bonus Depreciation: An additional first-year deduction that helps businesses deduct additional depreciation costs beyond normal depreciation allowances.

In years past, bonus depreciation law and Section 179 of the U.S. tax code allowed businesses to deduct up to 100% of capital purchases – including commercial and fleet vehicles. Unfortunately, this 100% automotive deduction expired on December 31, 2022, and was not renewed via the Tax Relief for American Families and Workers Act of 2024, as many businesses hoped.

Phase-Out Tax Deduction: Business Vehicles Qualify for These Deductions

Since December 31, 2022, the 100% automotive deduction has begun phasing out, dropping by 20% each subsequent year. The following bonus depreciation rates now apply to commercial vehicles, and Section 179 works in tandem with these percentages:

• 2023: $1,160,000 maximum Section 179 deduction + 80% bonus depreciation
• 2024: $1,220,000 maximum Section 179 deduction + 60% bonus depreciation
• 2025: $1,250,000 maximum Section 179 deduction + 40% bonus depreciation
• 2026: Section 179 deduction not yet published + 20% bonus depreciation
• 2027: Section 179 deduction not yet published + 0% bonus depreciation

If you’ve been excited about saving 100% in vehicle tax, right off the bat this reduced scale can feel disheartening. However, all hope is not lost for bonus depreciation for business vehicle purchase. The business vehicle write-off percentage that companies can deduct for commercial and fleet models does reduce each year moving forward, but you can still maximize your automotive deduction percentage by shopping sooner rather than later.

How To Claim and Maximize Commercial Vehicle Tax Benefits

Regarding how to claim a tax deduction, business vehicles can be written off by filling out IRS Form 4562. To fill out this form in its entirety, you will need access to the following information:

• Total expenses, including acquisition costs, maintenance, repairs, and lease payments
• Amount or level the vehicle was used for business purposes during the tax year
• Date of vehicle purchase and first use
• Reason for expensing this vehicle purchase

The best way to optimize your business vehicle write-off and gain the highest bonus depreciation deduction is to buy your commercial or fleet models as soon as possible. Because bonus depreciation rates are decreasing by 20% each year, the quicker you can purchase and put a vehicle into service, the more money your company can recoup next tax season.

Who Qualifies for Section 179 Tax Credit for Businesses and Fleet Vehicles?

With these new Section 179 percentages, how can companies still get the maximum possible tax deduction? Business vehicles continue to fall under the category of “depreciable assets,” which means your company can still qualify for Section 179 and bonus depreciation deductions if you spend less than $4.27 million per year buying business and fleet vehicles.

Official Section 179 Tax Code: 2025

“For taxable years beginning in 2025, under Section 179(b)(1), the aggregate cost of any Section 179 property that a taxpayer elects to treat as an expense cannot exceed $1,250,000, and under Section 179(b)(5)(A), the cost of any sport utility vehicle that may be taken into account under Section 179 cannot exceed $31,300. Under Section 179(b)(2), the $1,250,000 limitation under Section 179(b)(1) is reduced (but not below zero) by the amount by which the cost of Section 179 property placed in service during the 2025 taxable year exceeds $3,130,000.”²

List of Vehicles That Qualify for Section 179 in 2024

Unfortunately, there is no IRS list of vehicles over 6,000 pounds, nor does the IRS publish a complete list of Section 179-eligible models, so you’ll need to compare your current business and fleet vehicles to these categories to see which deductions apply:

• Tax Break for Vehicle Under 6,000 Pounds: Sadly, there is no Section 179 deduction for this category, which includes light vehicles like passenger cars, crossover SUVs, small trucks, and specialty vehicles like hearses.
• Tax Break for Vehicle Over 6,000 Pounds: Heavy vehicles like pickup trucks, cargo vans and box trucks with no passenger seating, and ambulances may be eligible for deductions up to $30,500.¹
• Tax Break for Vehicle Over 14,000 Pounds: These vehicles are not subject to Section 179 limitations.

The Section 179 rules also stipulate the following:

• The vehicle must be used for business purposes more than 50% of the time.
• New and used vehicles can qualify for Section 179.
• You cannot gain a Section 179 deduction worth more than your business’s income.
• It may be possible to carry over an unused deduction into future tax years.

Get Your Tax Deduction for Business Vehicles at Jim Ellis Commercial

We know this page is dense; IRS codes are complex, and it can be difficult to understand the current rules and regulations surrounding tax deduction. Business vehicles do qualify for Section 179 and bonus depreciation deductions and will continue to do so until 2027, but the amount of money you can save in automotive deductions will steadily decrease with each passing year.

You can get the biggest deductions possible when you shop our inventory at Jim Ellis Commercial. Our selection of new and used commercial and fleet vehicles can increase your company’s productivity while reducing its overall expenses.

Frequently Asked Questions

What is a commercial vehicle for tax purposes?

A commercial vehicle that is used for business purposes more than 50% of the time typically qualifies for tax deduction. Business vehicles can be purchased new or used, though specific restrictions apply to used vehicles under Section 179 and bonus depreciation laws. Talk with the Jim Ellis Commercial team to find answers for your particular company and commercial or fleet vehicle situation.

What vehicles qualify for bonus depreciation?

Any business vehicle can qualify for bonus depreciation, but the percentage of this automotive deduction decreases with each passing year, according to current IRS tax code. Commercial or fleet models that are purchased in 2024 qualify for 60% bonus depreciation, those purchased in 2025 will qualify for 40% bonus depreciation, and 2026 vehicles will earn a lower 20% bonus depreciation.

Can I deduct the purchase price of a vehicle for my business?

If the commercial or fleet vehicle you purchase weighs more than 6,000 pounds, you should be able to deduct part of its purchase price from your taxes. According to the 6,000-pound Vehicle Tax Deduction, businesses could deduct up to $30,500 for the purchase of models weighing over 6,000 pounds.¹ Additionally, vehicles over 14,000 pounds are not subject to Section 179 limitations.

¹This information is not verified by the official manufacturer and shall serve solely as unofficial general information. For details, visit: https://www.kbb.com/car-advice/section-179-tax-break-suvs-trucks-that-qualify/#:~:text=However%2C%20the%20tax%20year%202024,seat%2C%20such%20as%20shuttle%20vans

²This information is not verified by the official manufacturer and shall serve solely as unofficial general information. For details, visit: https://www.irs.gov/pub/irs-drop/rp-24-40.pdf