Can You Deduct the Full Cost of Your Vehicle in 2025?

Big News: The One Big Beautiful Tax Bill Is Now Law

The U.S. officially signed into law a sweeping tax reform package that brings back 100% bonus depreciation through 2029. This change makes it possible — once again — to write off the entire cost of qualifying vehicles in the year you purchase them.

If you’re a business owner, contractor, or rideshare driver thinking about buying a new car, van, or truck this year, this is a golden opportunity.

1. What Is Section 179?

Section 179 allows you to deduct the full purchase price of qualifying equipment and vehicles in the same year it’s placed in service.

Key Section 179 Rules for 2025:

• Deduction limit: $1.22M

• Phaseout threshold: $3.05M

• Business use: Must exceed 50%

• Special cap for SUVs (6,000–14,000 lbs): $31,300

• Heavy trucks and vans: Not capped under 179

Section 179 is applied before bonus depreciation.

2. 100% Bonus Depreciation Is Back

Under the new law, bonus depreciation is restored to 100% for assets placed in service between 2025 and 2029.

This allows business owners to deduct the entire cost of a vehicle (after applying Section 179) — even used vehicles qualify.

3. Why the 6,000 lb Rule Matters

Your vehicle’s Gross Vehicle Weight Rating (GVWR) determines how much of it you can deduct. Here’s a quick guide:

4. Real-World Examples

Uber Driver Buys a Chevy Tahoe for $75,000

• GVWR: 6,300 lbs

• Section 179 deduction: $31,300

• Bonus depreciation: $43,700

• Total deduction: $75,000

If the driver has $100,000 in net income, the deduction drops taxable income to $25,000 — reducing income tax and self-employment tax. If the loss exceeds Schedule C income, it may even offset W-2 income on a joint return.

Contractor Buys a Work Van for $80,000 (14,500 lbs GVWR)

• Entire $80,000 deductible under Section 179 in 2025

• No cap or luxury auto limit applies

Perfect for contractors in trades like HVAC, construction, or plumbing.

Freelancer Buys a $40,000 Toyota Camry

• Weight under 6,000 lbs triggers Section 280F limits

• Max first-year deduction ≈ $20,200 (even with 100% bonus)

The remaining cost is depreciated over future years. Not ideal if you’re looking for immediate write-offs.

5. Can These Losses Offset W-2 Income?

Yes — and this is a key strategy.

If you’re a sole proprietor or single-member LLC, large vehicle deductions that create a net loss on your Schedule C can reduce your total adjusted gross income (AGI). If you file jointly, that means offsetting W-2 wages from your spouse or other jobs.

This is how smart tax planning creates refunds — not bills.

6. What If You’re an S Corp?

If your LLC is taxed as an S Corporation, you still have powerful vehicle options — but they must be structured differently.

S Corp Strategy:

• Buy the vehicle under the company or personally (depending on ownership intent)

• Use an accountable plan to reimburse business vehicle use tax-free

• Deduct mileage or depreciation through S Corp return

• Combine this with:

  • A reasonable salary strategy

  • A Solo 401(k) or defined benefit plan

  • The Augusta Rule to rent your home to your business

Many Taxfully clients pair a smart S Corp setup with the vehicle deduction strategy to offset large profits and legally reduce taxes across the board.

With 100% bonus depreciation officially back, business owners in 2025 have a real chance to deduct the entire cost of their vehicle — if done right.

Taxfully is already helping clients plan around this new window of opportunity — combining bonus depreciation, accountable plans, and entity structuring to generate tax savings that stick.

Let’s make sure your next vehicle is both functional — and fully deductible.

Taxfully

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