Yes. A car, truck, van or SUV you buy for your business is generally tax deductible, but only the business-use share. If you drive it 70% for work and 30% for personal errands, 70% of the cost is on the table. The personal 30% never is.
There are two routes to the deduction. The first is a yearly operating deduction: either the Internal Revenue Service (IRS) standard mileage rate for 2026 or your actual 2026 costs (gas, insurance, repairs and so on). The second is writing off the purchase price itself through depreciation, which can be regular MACRS depreciation, a Section 179 election or 100% bonus depreciation. How much you can take in year one depends on two things: the vehicle's gross vehicle weight rating (under or over 6,000 pounds) and whether business use in 2026 is more than 50%.
This guide uses the official 2026 figures with worked examples. The IRS has not yet announced the 2027 standard mileage rates or the 2027 inflation-adjusted depreciation and Section 179 limits. When those come out, the numbers here will roll forward; until then, the 2026 figures are the latest official ones.
Can You Write Off a Car Purchase or Lease as a Business Expense?
When people talk about the "SUV tax loophole" or the "Hummer deduction," they mean a specific gap in the rules. The U.S. tax code permits businesses to write off specific qualifying property, including vehicles. But Section 280F puts tight yearly caps on how fast you can depreciate a passenger automobile. For 2026, those caps only apply to vehicles with a gross vehicle weight rating of 6,000 pounds or less.
A vehicle rated over 6,000 pounds escapes those caps. For a heavy SUV, pickup or van, the 2026 Section 179 SUV cap of $32,000 plus 100% bonus depreciation can cover most or all of the business share of the price in the first year. That is the whole "loophole." Large family SUVs land in this range, which is why the rule gets so much attention.
If you use the vehicle 100% for business, you can generally deduct the full cost of owning and operating it, subject to the 2026 caps above. If you also drive it for personal reasons, you deduct only the business share, measured by miles. That rule holds whether you deduct gas or mileage on your return, and it applies the same way whether you finance it, lease it or pay cash. How buying a business vehicle is structured matters less than how you drive it.
Two more points. First, W-2 employees generally cannot deduct unreimbursed car expenses at all under current law (IRS Topic 510). Second, leasing works differently: you deduct the business share of each lease payment as an operating cost, and Section 179 does not apply to a leased vehicle.
Standard Mileage Rate Vs. Actual Expenses
You can calculate your deductible car expense using either the actual expense method or the standard mileage rate. If you qualify for both, run the numbers both ways and take the larger one. The method you pick in the first year you use the car for business limits your options later, as explained in the mileage section below. Business parking fees and tolls are deductible on top of either method.
Deducting Actual Car Expenses
Under the actual expense method, you add up everything it costs to run the vehicle for the year, then multiply by your business-use percentage.
Actual expenses include:
- Gas and oil
- Repairs and maintenance
- Tires
- Insurance
- Registration fees and licenses
- Garage rent
- Lease payments (if you lease)
- Depreciation, Section 179 or bonus depreciation (if you own)
- Loan interest (self-employed owners only)
If your 2026 total is $9,000 and the car is 70% business, your 2026 deduction is $6,300. Business parking and tolls are deducted separately, in full, under either method. Parking at your regular office is commuting and does not count.
Self-employed people report car costs on Schedule C: line 9 for car and truck expenses, and line 13 for depreciation. The final 2026 Schedule C is posted on IRS.gov. Form 2106 is not the form for the self-employed. It is only for Armed Forces reservists, qualified performing artists and fee-basis state or local government officials. Most W-2 employees cannot deduct unreimbursed car expenses at all.
Leased vehicles. Under the actual method, you deduct the business share of your lease payments along with gas, insurance and the rest. For pricier vehicles, you must reduce the lease deduction by a small lease inclusion amount from the IRS tables in Rev. Proc. 2026-15 for leases that begin in 2026. The inclusion amount is designed to keep leasing from beating the depreciation caps that apply to purchased cars. Section 179 and bonus depreciation do not apply to a vehicle you lease.
Deducting Car Expenses Based on Mileage
You can use the IRS standard mileage rate to figure your deduction from business miles driven in an owned or leased vehicle. The rate differs by purpose.
For 2026 there are two business rates. Miles driven January 1 through June 30, 2026 use 72.5 cents per mile (Notice 2026-10). Miles driven July 1 through December 31, 2026 use 76 cents per mile (Announcement 2026-11), a rare mid-year increase the IRS made because of fuel prices. You must track miles separately for each half of the year. Using 76 cents for the whole year overstates your deduction. The charitable rate is 14 cents per mile, a figure fixed by law. The IRS will announce the 2027 rates in a separate notice; it has not done so yet.
You can't use the standard mileage rate if you:
- Operate five or more cars at the same time (a fleet)
- Claimed depreciation on the car using any method other than straight-line
- Claimed a Section 179 deduction on the car
- Claimed bonus depreciation (the special depreciation allowance) on the car
- Claimed actual expenses on a car you lease
If you own the vehicle, you must choose the standard mileage rate in the first year you use it for business. After that, you can switch between the two methods year to year. If you switch to actual expenses later, you must use straight-line depreciation for the rest of the car's life. One sales rep who had been deducting gas and repairs on a car found out the hard way that there was no going back to mileage for that car.
If you lease and pick the standard mileage rate, you must keep using it for the full lease term, including renewals.
Example: Mileage vs. Actual Expenses for 2026
Maria is a self-employed home inspector. In 2026 she drives 12,000 business miles, split evenly across the year.
| Period | Business miles | 2026 rate | Deduction |
|---|---|---|---|
| Jan 1 – Jun 30, 2026 | 6,000 | 72.5¢ | $4,350 |
| Jul 1 – Dec 31, 2026 | 6,000 | 76¢ | $4,560 |
| Total | 12,000 | $8,910 |
She also paid $300 in 2026 business parking and tolls, which she adds on top. Her 2026 mileage-method deduction is $9,210.
Now the actual method. Maria drove 16,000 total miles in 2026, so business use is 75%. Her actual 2026 costs were $3,200 in gas, $1,400 in insurance, $900 in repairs, $200 in registration and $4,000 in first-year depreciation, for $9,700. At 75% that is $7,275, plus the same $300 in parking and tolls, or $7,575 for 2026. Mileage wins by about $1,600 for 2026.
Because Maria chose the standard mileage rate in her first year, she can switch to actual expenses in any later year if her costs climb. If she had started with actual expenses, she would be locked out of the mileage rate for this car. The 2027 rate has not been announced, so she can't project next year yet.
How Section 179 Deductions Work
Normally, a business writes off a big purchase over several years through depreciation. For example, if a company spends $100,000 on a machine and uses straight-line depreciation over five years, it deducts $20,000 a year. That is a simplified picture; real MACRS depreciation uses percentage tables and half-year or mid-quarter conventions, so the amounts are not perfectly even.
Spreading a deduction over years is better than nothing, but it left many small and midsize businesses short on cash right when they needed equipment.
Congress created Section 179 to fix that. It is an election: instead of depreciating qualifying property over time, you choose to expense the full business cost in the year you place it in service. Qualifying property includes tangible equipment, off-the-shelf software and business vehicles.
For the 2026 tax year, you can expense up to $2,560,000 of qualifying property. That limit drops dollar-for-dollar once the total qualifying property you place in service in 2026 exceeds $4,090,000 (Rev. Proc. 2025-32). The property must be placed in service between January 1 and December 31, 2026 to go on your 2026 return. The 2027 limits will come in the IRS's annual inflation revenue procedure, which has not been released. See IRS Publication 946 for the full rules.
Do You Qualify for a Section 179 Deduction?
Three separate rules decide what you can take on a vehicle. People often blur them together, so here they are one at a time.
1. The more-than-50% test
For a vehicle placed in service in 2026, Section 179 and bonus depreciation both require more than 50% qualified business use in 2026. Exactly 50% does not pass. If 2026 business use is 50% or less, you can't use Section 179 or bonus, and you must depreciate the business share using straight-line ADS depreciation, which is the slowest method. You can still use the 2026 standard mileage rate or deduct actual 2026 operating costs at any business percentage.
2. The caps on passenger autos (6,000 lb GVWR or less)
For 2026, cars, light trucks and vans with a GVWR of 6,000 pounds or less are "passenger automobiles" under Section 280F. No matter which method you use (Section 179, bonus or regular MACRS), your yearly depreciation can't exceed these 2026 caps from Rev. Proc. 2026-15:
| Tax year | With bonus depreciation | Without bonus depreciation |
|---|---|---|
| Year 1 (placed in service in 2026) | $20,300 | $12,300 |
| Year 2 | $19,800 | $19,800 |
| Year 3 | $11,900 | $11,900 |
| Each later year | $7,160 | $7,160 |
Multiply each 2026 cap by your business-use percentage. At 60% business use, the 2026 year-1 cap with bonus is $12,180.
3. Vehicles over 6,000 lb GVWR
Heavier vehicles are not subject to the 280F caps. Most of them are "SUVs" for tax purposes, and the Section 179 portion is capped at $32,000 for 2026, with 100% bonus depreciation available on the rest of the business basis.
Per Publication 946, these heavy vehicles are not treated as SUVs, so the SUV cap does not apply to them:
- Vehicles designed to seat more than nine passengers behind the driver's seat (airport and hotel shuttles)
- Vehicles with a cargo area at least six feet long that is an open area or is enclosed but not readily accessible from the passenger compartment (a pickup with a full-size bed)
- Vehicles with a fully enclosed driver compartment and load area, no seating behind the driver's seat, and no body section protruding more than 30 inches ahead of the windshield (a cargo van)
These vehicles are exempt from the 280F passenger-auto caps because they are not likely to be used personally:
- Ambulances and hearses used in your business
- Taxis, transport vans and other vehicles used to carry people or property for hire
- Qualified non-personal-use vehicles, such as a work van with permanent interior shelving and the company logo painted on
Deducting Vehicle Costs With Section 179
If you split a vehicle between personal and business use, your allowable write-off is the cost multiplied by the business-use percentage from your mileage log.
For instance, you buy a car for your business in 2026 for $20,000. Your log shows 6,000 business miles out of 10,000 total, so business use is 60% and your business basis is $12,000.
Now check the 2026 cap. A car under 6,000 pounds placed in service in 2026 has a year-1 cap of $20,300 with bonus depreciation. At this car's business percentage, the cap works out to slightly more than your business basis, so you can write off the whole $12,000 in year one using bonus depreciation or Section 179.
This deduction lowers your taxable income by that amount; it does not cut your tax bill by the same amount, and it does not make the car free. You still pay full price for the car either way.
Other rules for the business vehicle deduction:
- Vehicles with a gross vehicle weight rating between 6,000 and 14,000 pounds face the 2026 SUV Section 179 cap described above. Any remaining business basis can take 100% bonus depreciation.
- Business use must pass the more-than-half test. If you also use the vehicle personally, every limit is reduced by the personal percentage.
- You claim Section 179 only in the tax year the vehicle is placed in service, meaning ready and available for business use, even if you have not driven it yet.
- Financing does not matter. A financed vehicle qualifies the same as one bought with cash, and you can also deduct car loan interest for the business share on top.
The vehicle must be bought from an unrelated party in an arm's-length deal. A vehicle bought from a parent, child, spouse or a business you control does not qualify. Sole proprietors can title the vehicle in their own name; it does not have to be in a company's name.
A vehicle you first used personally and later converted to business use does not qualify for Section 179 or bonus depreciation. You can still take regular depreciation on the business share, using the lower of your cost or the fair market value on the conversion date, or you can use the standard mileage rate.
Example: Heavy SUV Bought in 2026
Dan runs a landscaping business. In 2026 he buys a $70,000 SUV with a 7,000-pound GVWR and drives it 80% for business.
- Business basis: $70,000 × 80% = $56,000
- 2026 Section 179 (capped for SUVs): $32,000
- 2026 100% bonus depreciation on the rest: $56,000 − $32,000 = $24,000
- Total 2026 deduction: $56,000
Now compare his partner Lisa, who also buys in 2026: a $45,000 sedan under 6,000 pounds that she also drives 80% for business.
- Business basis: $45,000 × 80% = $36,000
- 2026 year-1 cap with bonus: $20,300 × 80% = $16,240
- The remaining $19,760 is recovered in later years, subject to the yearly caps.
Dan deducts $56,000 for 2026; Lisa deducts $16,240 for 2026. That weight difference is the "SUV loophole" in action. These are federal figures. Several states do not conform to bonus depreciation or the full Section 179 limits, so Dan's state return may spread the deduction over more years.
How Depreciation Works Under Section 179
Depreciation lets a business write off the cost of property over its useful life instead of all at once. Section 179 and bonus depreciation are faster alternatives to that normal schedule. There are three paths for a vehicle:
- Regular MACRS depreciation. Cars, light trucks and vans are 5-year property. Because of the half-year convention, the deductions usually spread across six tax years. Most machinery is 7-year property; computers are 5-year.
- Section 179 election. You expense the business cost (up to the limits) in year one.
- Bonus depreciation. You deduct 100% of the remaining business basis in year one for property acquired and placed in service after January 19, 2025.
Under every path, the business-use share sets your depreciable basis, and the Section 280F caps limit passenger autos of 6,000 pounds or less no matter which method you choose.
What Happens If Business Use Drops to 50% or Less
A big first-year write-off comes with strings. If your business use falls to half or less in any later year of the vehicle's recovery period, Section 280F recapture kicks in. You must add back to income the amount by which your Section 179 and bonus deductions exceeded what straight-line ADS depreciation would have allowed. You report this on Form 4797, and it is taxed as ordinary income.
Selling or trading in the vehicle triggers recapture too. Any gain up to the depreciation you claimed is ordinary income, not capital gain. Say you wrote off a $56,000 business basis in 2026 and sell the SUV two years later for $45,000. Most of that $45,000 (times the business percentage) comes back as taxable income. Plan for it before you sell.
Limits on Section 179 Deductions
The current figures are in IRS Publication 946 and Rev. Proc. 2025-32.
Dollar Limits
Current 2026 limits (Rev. Proc. 2025-32):
- Maximum 2026 Section 179 deduction: $2,560,000
- Phase-out begins once qualifying property placed in service in 2026 exceeds $4,090,000, reducing the deduction dollar-for-dollar
- The 2026 deduction is fully gone at $6,650,000 of purchases
2027: the IRS will publish the 2027 limits in its annual inflation revenue procedure. That document has not been released, so no 2027 figure is available yet.
100% Bonus Depreciation Is Back (and Permanent)
The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for property acquired and placed in service after January 19, 2025. IRS Notice 2026-11 is the guidance. Property acquired on or before January 19, 2025 stays under the old phase-down schedule (40% for 2025). For the first tax year ending after January 19, 2025, a taxpayer may elect 40% instead of 100%.
For vehicles, bonus depreciation interacts with the rules above in three ways:
- Passenger autos (6,000 lb or less): bonus does not lift you above the 280F cap. It only adds the extra $8,000 built into the cap, which is why the 2026 year-1 limit is $20,300 with bonus and $12,300 without.
- Heavy SUVs: bonus has no dollar cap. After the SUV Section 179 limit, 100% bonus can cover the entire remaining business basis.
- Income: bonus depreciation is not limited by your business income. It can create or deepen a loss, which Section 179 cannot do.
Business Income Limit
Your Section 179 deduction cannot exceed your taxable income from the active conduct of any trade or business for the year. W-2 wages from a job count as business income for this test, which helps side-business owners. If your business has a loss and you have no wages, Section 179 is disallowed for the year, but the unused amount carries forward to future years.
Bonus depreciation has no income limit. If a vehicle write-off would push you into a loss, bonus depreciation can take you there while Section 179 cannot, so the order in which you apply them matters.
How to Take the Deduction
A business vehicle deduction lives or dies on records. Mixed-use vehicles draw IRS attention, and the owner who cannot produce a log usually loses. Plan to work with a tax expert who can help you claim everything you are entitled to and nothing you can't support.
Here's how to take your deduction:
- Buy the vehicle and place it in service during the tax year.
- Keep a mileage log as you go. For each business trip record the date, destination, business purpose and miles, plus start and end-of-year odometer readings. An app or notebook works; rebuilding it in April does not.
- Keep the purchase records: the date of purchase, the date you began using it for business, the price, sales tax and any financing documents.
- Complete Form 4562. Part I is for the Section 179 election. Part V is for listed property, which includes vehicles; it asks for business-use percentage and mileage. The depreciation flows to Schedule C, line 13.
- If you don't need Form 4562 (for example, you use the standard mileage rate and are not depreciating anything new), report your vehicle details in Schedule C, Part IV.
- File it with your return, including extensions. For a 2026 Schedule C, the due date is April 15, 2027.
Deducting Car Sales Tax
Sales tax on a business vehicle is not a separate deduction. The business-use share of the sales tax becomes part of the vehicle's cost basis and is recovered through depreciation, Section 179 or the standard mileage rate. Only the personal-use share can go on Schedule A, and only if you elect to deduct sales tax instead of income tax. You can't deduct the same dollars both places.
Write off Vehicle Sales Tax as a Business Expense
The Schedule C instructions are clear: sales tax on property you buy is part of the property's cost, not a "taxes and licenses" expense on line 23. You add it to the vehicle's basis.
Example: you buy a $40,000 work truck and pay $2,800 in sales tax. Your basis is $42,800. At 80% business use, your depreciable business basis is $34,240. Line 23 is still the right place for yearly business registration and license fees.
Write off Vehicle Sales Tax as an Itemized Personal Deduction
On Schedule A, you can deduct either state and local income taxes or state and local general sales taxes, but not both. If you choose sales tax, you may add the sales tax paid on a vehicle at the general rate to the IRS table amount. This only helps if you itemize instead of taking the standard deduction.
The state and local tax (SALT) deduction is capped. For 2026, the cap is $40,400 ($20,200 if married filing separately), per the Schedule A instructions. The 2026 cap phases down once modified adjusted gross income exceeds $505,000 ($252,500 married filing separately), but never below $10,000 ($5,000 married filing separately). Only the personal-use share of the vehicle's sales tax belongs here; the business share is already in your basis.
Deducting Interest for Financed Vehicles
If you are self-employed and finance a vehicle you use for business, the business share of the loan interest is deductible. At 100% business use, all of the interest is deductible.
Self-employed people deduct the business share on Schedule C, line 16b (other interest). You can take it even if you use the standard mileage rate, because interest is not built into the per-mile rate. W-2 employees cannot deduct car-loan interest as a business expense.
Keep your mileage log current. It sets the business percentage for the interest deduction, just as it does for everything else. The personal share of the interest may qualify for the new personal car-loan interest deduction described next.
New Deduction for Personal Car-Loan Interest (2025–2028)
The One Big Beautiful Bill Act created a temporary deduction for interest on a personal-use vehicle loan. For tax years 2025 through 2028, you can deduct up to $10,000 a year of qualified passenger vehicle loan interest. You do not need to itemize. Final regulations were issued as T.D. 10054, and the IRS explains the rules in Topic 505 and a newsroom release.
To qualify, the loan and vehicle must meet these tests:
- The loan was taken out after December 31, 2024 and is secured by a first lien on the vehicle
- The vehicle is new (original use starts with you); used vehicles don't qualify
- Final assembly took place in the United States (check the window sticker or VIN)
- GVWR is under 14,000 pounds
- The vehicle is for personal use; leases don't qualify
- You include the VIN on your return
For 2026, the deduction phases out when modified adjusted gross income exceeds $100,000 ($200,000 on a joint return), dropping $200 for each $1,000 over the threshold.
Mixed-use vehicles. The interest splits. The business share goes on Schedule C as business interest. The personal share may qualify for this new deduction. Say you pay $3,000 of interest in 2026 on a qualifying new car used 40% for business: $1,200 is 2026 Schedule C interest and the other $1,800 is personal-use interest that can qualify here for 2026, if you meet the income and vehicle tests.
What to Do Next
- Check the gross vehicle weight rating on the driver's door sticker to see whether the vehicle is over or under 6,000 pounds.
- Start a mileage log today with the date, destination, business purpose and miles for every trip.
- Add the business share of sales tax to the vehicle's cost basis instead of putting it on Schedule C line 23.
- Decide between the 2026 standard mileage rate and actual expenses before you file, since the first-year choice limits later years.
- Complete Form 4562 (Part I for Section 179, Part V for the vehicle) and carry the total to Schedule C line 13 by April 15, 2027.
FAQs
Here are the answers to common questions about deducting a car for business use, using the 2026 figures.
For 2026 it depends on weight and business use. A vehicle with a GVWR of 6,000 pounds or less is capped at $20,300 in year one with bonus depreciation, times your business percentage (Rev. Proc. 2026-15). A heavier SUV gets a $32,000 Section 179 cap plus 100% bonus depreciation on the rest. Business use must exceed 50%.
No, not the payment itself; loan principal is never deductible. If you own the car, you deduct depreciation (or Section 179/bonus) plus the business share of interest, or use the standard mileage rate plus business interest. If you lease, the business share of each payment is deductible under the actual method, minus any IRS lease inclusion amount.
Yes, but on a schedule. For a vehicle of 6,000 pounds or less placed in service in 2026, the caps are $20,300 in year one with bonus depreciation ($12,300 without), $19,800 in year two, $11,900 in year three and $7,160 each year after that. Multiply every figure by your business percentage. See Rev. Proc. 2026-15 and Publication 946.
Yes. A single-member LLC reports the vehicle on Schedule C, like a sole proprietor. A multi-member LLC or one taxed as a corporation claims it on its own return, and Section 179 passes through to members subject to their own limits. Or the LLC can reimburse the owner's business miles at the IRS rate under an accountable plan.
Business use includes travel between two business locations, from one client or job to another, and to a temporary worksite. If your home office is your principal place of business, trips from home to clients count. Driving from home to a regular workplace is personal commuting. A work call during a personal errand does not make it business.
Under the actual expense method, repairs are deductible for the business-use share at any business percentage; the 50% rule does not apply. If you use the standard mileage rate, repairs are already built into the per-mile rate and you cannot deduct them separately.
Generally no. The One Big Beautiful Bill Act ended the commercial (Section 45W), new (Section 30D) and used (Section 25E) clean vehicle credits for vehicles acquired after September 30, 2025. A binding written contract plus a payment by that date still counts. An EV bought now can still be depreciated or expensed under the same weight-based limits.
The IRS has not released them. The 2027 mileage rate notice usually comes out in December, and the 2027 Section 179 limits will appear in the annual inflation revenue procedure. Until then, the official figures are the 2026 ones: 72.5¢ and 76¢ per mile, a $2,560,000 Section 179 limit and a $32,000 SUV cap.
Yes, if it is placed in service, meaning ready and available for business use, by December 31, 2026. Signing the paperwork is not enough; a vehicle delivered in January goes on the 2027 return. Section 179 and bonus depreciation are not prorated by month, but business use must still exceed 50%for the year.