For many business owners, purchasing a company vehicle is a necessary investment—but it can also be a great tax-saving opportunity. The Section179 deduction allows businesses to write off the full cost of qualifying vehicles in the year they’re placed in service. However, there are specific rules you must follow to take advantage of this tax benefit.

In this article we’ll cover how Section 179 applies to business vehicles, what qualifies, how depreciation works, and what happens when you sell or dispose of the vehicle.

What Is the Section 179 Deduction?

Section 179 of the tax code is designed to encourage small businesses to invest in equipment by allowing them to deduct the full purchase price of qualifying assets in the year they’re placed in service, rather than spreading the deduction over several years. Vehicles used for business purposes are one of the most common assets eligible for this deduction.

When Can You Use Section 179 for a Vehicle?

To qualify for the Section179 deduction, a vehicle must meet these criteria:

• It must be used for business purposes at least 50% of the time. The IRS requires documentation (such as mileage logs) to prove business use.
• It must be purchased and placed in service within the tax year. Simply ordering a vehicle does not qualify—you must take possession of it and begin using it for business.
• It must be titled in the business’s name if your company is an entity such as an LLC or corporation.

What Types of Vehicles Qualify?

• Passenger vehicles (under 6,000 lbs. gross vehicle weight rating, or GVWR): Eligible for a partial Section 179 deduction, subject to annual limits.
• Heavy SUVs, Trucks, and Vans (over 6,000 lbs. GVWR): Eligible for a larger deduction, potentially up to the full purchase price.
• Special-use vehicles (like delivery trucks, ambulances, or hearses): Typically fully deductible under Section 179.

How Much Can You Deduct?

For 2024, the Section 179 limits are:

• Up to $20,400 for passenger vehicles under 6,000 lbs. GVWR.
• Up to $31,300 for heavy SUVs and trucks over 6,000 lbs. GVWR.
• 100% deduction for certain heavy-use and work-specific vehicles.

In addition to Section 179, businesses may also claim bonus depreciation, which allows an additional deduction on the remaining vehicle cost. However, bonus depreciation is currently being phased out, so check with a tax professional for the latest rules.

Depreciating the Remaining Balance

If the cost of the vehicle exceeds the Section 179 deduction limit, the remaining balance must be depreciated over time using the Modified Accelerated Cost Recovery System (MACRS).

• Passenger vehicles are typically depreciated over five years.
• Vehicles used less than 50% for business must be depreciated using straight-line depreciation instead of the accelerated MACRS method.

What Happens When You Sell or Dispose of the Vehicle?

Many business owners don’t realize that taking a large upfront deduction comes with potential tax consequences later.

• If you sell the vehicle after claiming a Section 179 deduction, any amount you sell it for—up to the original deduction—will be recaptured as taxable income.
• If the vehicle is converted to personal use, you may need to recapture a portion of the deduction based on the fair market value at the time of conversion.

Example:
You purchase an SUV for $70,000 and take a $31,300 Section 179 deduction. Three years later, you sell the vehicle for $40,000. That $31,300 deduction is recaptured as taxable income unless additional depreciation was claimed.

How Often Can Your Business Use Section 179 for a Company Car?

There’s no limit on how many times you can claim Section 179 for a business vehicle, as long as:

• Your business has sufficient taxable income to support the deduction.
• You don’t exceed the annual Section 179 spending cap (which is $1,250,000 for 2025).

However, buying vehicles too frequently with Section 179 could attract IRS scrutiny—especially if you’re not keeping adequate mileage logs or selling vehicles soon after purchase.

Common Pitfalls and IRS Red Flags

• Mixing personal and business use: If you fail to keep proper records, the IRS may deny part or all of your deduction.
• Buying luxury vehicles: The IRS imposes luxury auto limits, so high-end cars often have restricted deductions.
• Frequent purchases and sales: Claiming Section 179 deductions on vehicles that are sold or replaced too quickly may be seen as abuse of the tax code.

Best Practices for Claiming Section 179 on a Vehicle

To ensure your deduction holds up in an audit:

• Keep detailed mileage logs showing at least 50% business use.
• Title the vehicle in the business’s name (if applicable).
• Retain all purchase documents and financing agreements.
• Work with a tax professional to maximize deductions while avoiding recapture issues.

Final Thoughts

Section 179 can be a powerful tax strategy for businesses that need vehicles, but it’s essential to follow the rules carefully. Proper documentation and strategic planning will ensure you maximize the benefit without unexpected tax consequences down the road.

Need help determining if Section179 is the right move for your business? Contact us at Rose Group CPAs to discuss your small business tax and accounting needs.