Luxury Cars That Qualify for Section 179

Section 179 of the Internal Revenue Code allows businesses to expense the full purchase price of qualifying assets in the year they are acquired, providing an immediate tax benefit. While often associated with machinery and software, this provision is frequently used for vehicle purchases. However, the application of Section 179 to vehicles is governed by a distinct set of rules and limitations that business owners must understand to leverage the deduction properly.

Standard Vehicle Deduction Limits

The Internal Revenue Service imposes specific limitations on depreciation deductions for most passenger automobiles, often called “luxury auto limitations.” These rules apply to cars, light trucks, and vans with a Gross Vehicle Weight Rating (GVWR) of 6,000 pounds or less. The purpose of these caps is to prevent excessive tax write-offs for vehicles that might have a significant element of personal use. These limits are updated periodically for inflation.

For a passenger vehicle under the 6,000-pound GVWR threshold placed in service in 2024, the maximum first-year depreciation deduction is capped at $20,400. This amount includes the Section 179 expense and any bonus depreciation. This cap is substantially lower than the total cost of many new vehicles, which motivates business owners to find vehicles that fall outside these restrictive limits.

The Heavy Vehicle Exception

A significant exception to the standard luxury auto limitations exists for “heavy” vehicles with a manufacturer’s Gross Vehicle Weight Rating (GVWR) over 6,000 pounds. The GVWR is the maximum allowable total weight of a road vehicle when fully loaded, including its own weight plus fuel, passengers, and cargo. This rating is determined by the manufacturer and can be found on a placard inside the driver’s side doorjamb.

Because they are not subject to the same restrictive annual depreciation caps, vehicles exceeding the 6,000-pound GVWR threshold qualify for a more substantial Section 179 deduction. For tax year 2024, the deduction for sport utility vehicles in this category is limited to $30,500, and for 2025, this limit is scheduled to increase to $31,300. This rule is sometimes referred to as the “SUV tax loophole,” as it allows a business to write off a large portion of a qualifying vehicle’s cost.

Many popular high-end models meet the weight requirement. Examples of vehicles that often have a GVWR over 6,000 pounds include the Cadillac Escalade, many Range Rover models, the Ford F-150 and larger trucks, the Mercedes-Benz G-Class, the Lincoln Navigator, and the Chevrolet Tahoe. A buyer must verify the specific GVWR for the exact model and configuration they intend to purchase, as different versions of the same vehicle can have different ratings. A crew-cab model of a truck, for instance, might qualify while an extended-cab version does not.

Key Requirements for Claiming the Deduction

Purchasing a heavy vehicle is not sufficient to claim the Section 179 deduction; the vehicle must meet specific use requirements. The primary requirement is the business use test. To qualify, the vehicle must be used more than 50% of the time for qualified business purposes, calculated by dividing business miles by total miles driven. Commuting miles between a taxpayer’s home and primary place of business are considered personal, not business, miles.

If business use is over 50% but less than 100%, the deduction must be prorated. For example, a vehicle used 80% for business would be eligible for 80% of the maximum allowable Section 179 deduction. Taxpayers must maintain detailed records, such as a mileage log, to substantiate their business use percentage. Failure to provide adequate records can result in the disallowance of the deduction.

Two other conditions also apply. The “placed in service” rule requires that the vehicle be purchased and actively used for its business purpose during the tax year for which the deduction is claimed. Furthermore, the total Section 179 deduction a business can claim for the year is limited by its net taxable income and cannot be used to create a net loss.

Calculating and Applying the Deduction

To calculate the total first-year write-off, a taxpayer often combines the Section 179 deduction with bonus depreciation. This process allows businesses to deduct a large portion of the vehicle’s cost in the first year, subject to certain limits.

Consider a qualifying heavy SUV purchased for $90,000, used 100% for business, and placed in service in 2024. The taxpayer would first apply the Section 179 deduction. For 2024, the maximum Section 179 deduction for a heavy SUV is $30,500, which is subtracted from the vehicle’s cost basis, leaving a remaining basis of $59,500 ($90,000 – $30,500).

Next, the taxpayer can apply bonus depreciation to the remaining cost. For property placed in service in 2024, the bonus depreciation rate is 60%. This allows for an additional deduction of $35,700 (60% of $59,500). The combination of the Section 179 deduction ($30,500) and bonus depreciation ($35,700) results in a total first-year deduction of $66,200. If business use of the vehicle drops to 50% or less in a future year, the IRS may require a “recapture” of a portion of the previously claimed deduction.