Section 179 vs. Bonus Depreciation for Business Vehicles: An Explainer

A clear comparison of two powerful tax deductions designed to help businesses recover the cost of eligible vehicles more quickly.

By Garret Merkley · Explainer · Jun 3, 2026

Branched from Tax Rules for Selling a Business Truck After 100% Bonus Depreciation and Custom Outfitting

Quick take

Section 179 allows businesses to deduct the full purchase price of qualifying equipment, including certain vehicles, up to an annual limit in the year it's placed in service.
Bonus Depreciation allows businesses to deduct a large percentage (e.g., 80% for 2023) of the cost of qualifying new or used property, including vehicles, in the first year.
Both deductions accelerate the recovery of asset costs, reducing taxable income and improving cash flow, but they have different rules and limitations.
The optimal choice often depends on the business's taxable income, the specific vehicle's characteristics, and current tax law.

Section 179 and Bonus Depreciation are two distinct provisions in the U.S. tax code that allow businesses to deduct the cost of eligible assets, such as vehicles, more rapidly than standard depreciation schedules. Both aim to incentivize business investment by providing immediate or accelerated tax relief, but they operate under different rules and offer unique advantages.

How Section 179 Works: Immediate Expensing

Section 179 allows businesses to deduct the full purchase price of qualifying equipment and software (up to an annual limit) in the year it's placed in service, rather than depreciating it over several years. For vehicles, this often applies to heavy SUVs, pickups, and vans with a Gross Vehicle Weight Rating (GVWR) over 6,000 pounds, which have higher deduction limits than passenger cars. The deduction cannot create a net loss for the business; it's limited by the business's taxable income. There's also an overall investment limit, beyond which the Section 179 deduction begins to phase out.

How Bonus Depreciation Works: Accelerated Write-Off

Bonus Depreciation allows businesses to deduct a significant percentage (e.g., 80% for assets placed in service in 2023, phasing down in subsequent years) of the cost of qualifying new or used property in the first year. Unlike Section 179, Bonus Depreciation can create or increase a net operating loss (NOL) for the business, and it is not limited by taxable income. It applies more broadly to most business assets, including vehicles, and doesn't have the same taxable income or overall investment limitations as Section 179.

The percentage of bonus depreciation has been 100% for several years but began to phase down starting in 2023. It will be 80% for property placed in service in 2023, 60% in 2024, 40% in 2025, and 20% in 2026, before expiring in 2027 (unless extended by Congress).

Both Section 179 and Bonus Depreciation are powerful tools for managing cash flow and reducing taxable income, making business investments more attractive. Section 179 is often favored by smaller businesses with positive taxable income who want to fully expense specific assets up to the annual limit. Bonus Depreciation is particularly useful for larger asset purchases or when a business anticipates a net operating loss, as it's not restricted by taxable income. Many businesses strategically use both, applying Section 179 first to maximize the immediate write-off, then utilizing Bonus Depreciation on any remaining basis of the asset. The choice depends heavily on the business's specific financial situation, the cost and type of vehicle, and current tax law.

Choosing Your Deduction Strategy

**For Section 179:** Consider it if you have sufficient taxable income to cover the deduction and want to fully expense specific assets (like heavy SUVs or trucks) up to the annual limit.
**For Bonus Depreciation:** Opt for it if you have large asset purchases, anticipate a net operating loss, or if the asset doesn't fully qualify for Section 179's higher limits (e.g., passenger cars).
**Combined Approach:** Many businesses use Section 179 first to expense as much as possible, then apply Bonus Depreciation to any remaining basis of the asset.

Can I use both Section 179 and Bonus Depreciation on the same vehicle?

Yes, you often can. You can elect to use Section 179 first to deduct a portion of the vehicle's cost. If there's a remaining balance, you can then apply Bonus Depreciation to that remaining amount, provided the vehicle qualifies for both deductions.

What types of vehicles qualify for these deductions?

Generally, vehicles purchased for business use. For Section 179, heavy SUVs, pickups, and vans with a Gross Vehicle Weight Rating (GVWR) over 6,000 pounds often qualify for higher deduction limits. Passenger cars have lower limits. Bonus Depreciation applies more broadly to most new or used business vehicles.

Do these deductions apply to leased vehicles?

No, generally these deductions apply to vehicles that are purchased and owned by the business. For leased vehicles, businesses typically deduct the lease payments as an ordinary and necessary business expense.

What happens if I sell the vehicle later?

When you sell an asset for which you've taken Section 179 or Bonus Depreciation, you generally have to "recapture" some of the deduction as ordinary income, up to the amount of the gain on the sale. This is known as depreciation recapture and effectively reverses the tax benefit on the portion of the asset's value that was previously deducted.

What are the current deduction limits for Section 179?

The Section 179 deduction limit and the investment limit (phase-out threshold) are adjusted annually for inflation. For 2023, the maximum Section 179 deduction is $1,160,000, and the phase-out begins when equipment purchases exceed $2,890,000. Specific limits still apply to certain vehicles, such as $28,900 for certain heavy SUVs.

Sources

IRS.gov (for Section 179 and Bonus Depreciation rules and limits)