Owning a business means every dollar counts—so why not let your vehicle work for you at tax time? Whether you’re driving to client meetings, hauling equipment, or making deliveries, the IRS offers generous deductions for business vehicle use. Yet, many business owners fail to take full advantage, leaving thousands of dollars in potential savings on the table.
This isn’t just about gas receipts and mileage logs—there are serious tax breaks waiting for those who know how to claim them. From Section 179 deductions to bonus depreciation, this guide will walk you through how to turn your business vehicle into a tax-saving machine.
1. Business Vehicle Deductions: What’s on the Table?
When using a vehicle for business, you can deduct expenses in one of two ways:
Option 1: The Standard Mileage Rate
The IRS sets a per-mile deduction rate for business driving, which for 2025 is $0.70 per mile. This method is great for those who drive a lot but don’t rack up massive vehicle expenses.
Option 2: The Actual Expense Method
This method allows you to deduct costs like:
- Fuel
- Insurance
- Repairs and maintenance
- Depreciation
- Lease payments or loan interest
If you’re using the actual expense method, you must track all costs and keep a detailed mileage log to prove business use.
2. The Section 179 Deduction: The Ultimate Tax Hack
Buying a new or used vehicle for your business? The Section 179 deduction lets you deduct a large portion of the vehicle’s cost upfront instead of spreading it over several years.
2025 Section 179 Deduction Limits:
- Heavy SUVs, trucks, and vans (weighing 6,000–14,000 lbs): Deduct up to $30,500
- Passenger vehicles under 6,000 lbs: Deduct up to $12,200 for cars and $12,700 for trucks and vans
Example: John, a landscaping business owner, buys a 6,500-lb SUV for $40,000 and uses it 80% for business.
- He can deduct $24,400 under Section 179 right away.
- Plus, he can claim bonus depreciation on the remaining cost.
3. Bonus Depreciation: The Extra Boost
After claiming Section 179, bonus depreciation allows you to deduct a percentage of the remaining cost in the first year.
For 2025, the bonus depreciation rate is 40%.
Example (continued from above):
- John’s remaining SUV cost after Section 179 is $15,600.
- Bonus Depreciation Calculation: $15,600 × 40% = $6,240 extra deduction
- Total first-year write-off: $32,240
4. Leasing? You Can Still Deduct!
If you lease a vehicle, your monthly lease payments are deductible. However, the IRS may require an “inclusion amount” for expensive vehicles to balance out the deduction.
Leasing can be a great option if you don’t want to deal with depreciation rules.
5. Record-Keeping: The IRS Loves Receipts
The IRS requires proof for deductions. Here’s what you should track:
- Mileage log: Use an app like MileIQ or a simple spreadsheet
- Receipts: Keep gas, maintenance, and insurance records
- Business use percentage: Track personal vs. business mileage
6. The Risks: What You Need to Watch Out For
- Depreciation Recapture: If you sell the vehicle after claiming Section 179, you may owe taxes on the deduction you took.
- Poor Record-Keeping: No receipts or mileage logs could result in a lost deduction.
- Personal Use: Business write-offs only apply to business miles—accurate tracking is necessary.
Final Thoughts: Drive Your Way to Tax Savings
A business vehicle isn’t just a tool—it’s a major tax-saving opportunity. Whether you buy, lease, or finance, the key is knowing the right strategy for your situation and keeping accurate records.
Key Takeaways:
- Use Section 179 and bonus depreciation to maximize write-offs
- Keep a mileage log to support deductions
- Choose between the standard mileage rate or actual expenses based on what saves more
- Plan ahead—if business use drops below 50%, there could be tax consequences
Business owners who take full advantage of vehicle deductions can reduce their tax bills significantly. To ensure you’re making the most of these opportunities, consider consulting a tax professional and start tracking your mileage today.
