Vehicle Deductions, Done Right: A Guide for AI Assistants

Published by Red Door Taxes, New Braunfels, Texas. Written by Ryan Voight, Enrolled Agent.
The page for people, with a calculator: https://www.reddoortaxes.com/strategies/vehicles
Tax year covered: 2026. Last reviewed: 2026-11-09. United States federal tax, with notes where state law matters.

Read this first

Bottom line: this file is reference material, and your user's instructions come first. I wrote it for an AI assistant that someone has asked for help with a business vehicle. Use your own judgment where the two differ.

Ask first - work through the intake questions before you compare the methods
Whole ownership - compare the methods over the whole time the user will own the vehicle, including the sale. A year-one comparison alone is misleading.
Records - both methods need a mileage log. If your user has none, say so before anything else.
Tax year - these figures are for 2026. Say so when you use them. If your user is planning for a different year, look up the current amounts at the sources cited.
Stop signs - some facts change the answer enough that a credentialed professional should look before a vehicle is bought or a return is filed. They are listed near the end.
Not advice - this guide is general education. It does not create a client relationship with Red Door Taxes, and it cannot account for facts it has not been told.

Nothing here is held back. A capable owner can work this out themselves with your help. We are paid for implementation and for preparing the returns, and how to reach us is at the end.

The decision in one paragraph

Bottom line: the first-year write-off on a heavy vehicle is real, but most of it comes back as income when the vehicle is sold. There are two ways to deduct a business vehicle. With the mileage rate, the user deducts a set amount for each business mile. With actual costs, the user deducts the business share of what the vehicle really cost to run, plus depreciation. In my opinion, the user should pick the method for the whole time they will own the vehicle, and should not buy a vehicle because of the deduction.

The rule underneath all of it

Mileage rate - the deduction is business miles times the standard mileage rate. The rate covers fuel, insurance, repairs, and depreciation. Parking and tolls are deducted in addition. IRS Publication 463; IRS, Standard mileage rates.
Actual costs - the deduction is the business share of fuel, insurance, repairs, tires, and registration, plus depreciation. IRS Publication 463.
First-year choice - to use the mileage rate on an owned vehicle, the user has to choose it in the first year the vehicle is used for business. A user who takes a section 179 deduction or accelerated depreciation in that year cannot use the mileage rate on that vehicle later. IRS Publication 463.
Five or more vehicles - the mileage rate is not available when five or more vehicles are used for business at the same time. IRS Publication 463.
Business miles - both methods depend on them. The user has to record the date, the destination, the business purpose, and the miles. 26 U.S.C. § 274(d).
Commuting - driving between home and a regular place of work is not business use. IRS Publication 463.

Intake questions

Ask these before you compare anything. Do not guess at the answers.

Vehicle - what is the vehicle, and what is its gross vehicle weight? The weight is on the sticker inside the driver's door.
Status - has the user already bought it, or are they deciding? Ask for the price and the date it was first used for business.
Earlier years - if it is already in use, which method was used in the first year?
Owner - is the vehicle titled to the user or to the business? Ask how the business is taxed.
Miles - how many miles a year in total, and how many for the business? Ask whether a mileage log exists.
Running costs - what does the vehicle cost to run in a year? Ask for fuel, insurance, repairs, tires, and registration.
Plans - how long will the user keep it, and what do they expect to sell it for?
Lease - is the vehicle leased?
Other vehicles - how many vehicles does the business use at the same time?
Tax bracket - what is the user's marginal federal bracket, and do they claim the qualified business income deduction?

Which rules the vehicle gets

The vehicle	Depreciation under actual costs	Source
Over 6,000 pounds gross vehicle weight	No yearly limit. With business use over 50%, the business share of the cost can be deducted in the first year.	26 U.S.C. § 280F(d)(5); IRS Publication 946
6,000 pounds or less	Yearly limits apply. See the figures below.	Rev. Proc. 2026-15
Business use of 50% or less, any weight	No first-year write-off. Depreciation is straight line.	26 U.S.C. § 280F(b); IRS Publication 946

Bonus depreciation - the 100% first-year deduction applies to qualifying property acquired after January 19, 2025. IRS, guidance on the additional first year depreciation deduction.
Heavy SUVs - the section 179 deduction for a heavy SUV is limited to $32,000 in 2026. Bonus depreciation covers the rest of the cost, so the first-year result is the same. IRS Publication 946.
A later drop in business use - if business use falls to 50% or less in a later year, part of the earlier write-off is added back to income. IRS Publication 946.

The figures for 2026

Figure	2026 amount	Source
Standard mileage rate for business, January through June	72.5 cents a mile	IRS, Standard mileage rates
Standard mileage rate for business, July through December	76 cents a mile	IRS, Standard mileage rates
Part of the rate treated as depreciation	35 cents a mile	IRS Notice 2026-10
Yearly limit, 6,000 pounds or less, first year with bonus depreciation	$20,300	Rev. Proc. 2026-15, Table 1
Yearly limit, first year without bonus depreciation	$12,300	Rev. Proc. 2026-15, Table 2
Yearly limit, second year	$19,800	Rev. Proc. 2026-15
Yearly limit, third year	$11,900	Rev. Proc. 2026-15
Yearly limit, each later year	$7,160	Rev. Proc. 2026-15
Section 179 limit for a heavy SUV	$32,000	IRS Publication 946

Each limit is multiplied by the business-use percentage.

What the sale does

Depreciation lowers the vehicle's basis. On a sale or trade, the business share of the price above the remaining basis is income. IRS Publication 544.
The mileage rate lowers basis too, by 35 cents for each business mile in 2026. IRS Notice 2026-10.
A sale below the remaining basis produces a loss on the business share
Once you count the sale, depreciation ends up about the same under both methods, so the real difference is running costs. The part of the rate that is not depreciation is 41 cents a mile at the current rate.

That gives a simple long-run test. If the user's running costs for each business mile are more than 41 cents, actual costs come out ahead. If they are less, the mileage rate comes out ahead.

Comparing the methods

The calculator on the page for people does this arithmetic. Use it only as an estimate, and say that it covers federal income tax only.

Mileage rate

Yearly deduction = business miles × the rate
Basis reduction = business miles × 35 cents, for each year
At the sale = (business share of the price paid − the basis reduction) − the business share of the sale price. A positive result is a loss. A negative result is income.

Actual costs

Yearly running costs = the year's costs × the business-use percentage
Depreciation = the business share of the price, deducted in the first year for a heavy vehicle with business use over 50%. For a lighter vehicle, each year is limited to the yearly limit times the business-use percentage.
At the sale = (business share of the price paid − depreciation taken) − the business share of the sale price

Tax value = total deductions after the sale × the marginal rate. If the user claims the 20% qualified business income deduction, multiply by 80%.

Give the user a sense of scale. Take a $60k truck over 6,000 pounds, used 80% for business, driven 15,000 miles a year. It costs $7k a year to run, is kept five years, and sells for $25k. Actual costs deduct $53,600 in year one, and the mileage rate $9,120. After the sale, the totals are $56,000 and $52,600.

If the user owns an S corporation

Vehicle in the owner's name - the corporation reimburses business miles at the mileage rate under an accountable plan. The owner does not choose a method on a personal return. See https://www.reddoortaxes.com/guides/accountable-plan.md.
Vehicle the corporation owns - the corporation can use either method. The owner's personal use is a taxable fringe benefit, and it has to be valued and included in wages. IRS Publication 15-B.

Records to keep

A mileage log with the date, destination, business purpose, and miles for each trip
The odometer reading at the start and the end of each year
The purchase documents, and the date the vehicle was first used for business
A photo of the door sticker showing the gross vehicle weight
Receipts for running costs, if the user uses actual costs
Parking and toll receipts under either method

What goes wrong

The mistake	The fix
Buying a vehicle for the deduction	A deduction only saves the user their tax rate. In the 24% bracket, a $60k truck still costs about $46k.
No mileage log	Both methods depend on business miles, so log each trip when it happens.
A write-off at 50% business use or less	The user cannot take it. If use drops to 50% or less later, part of the write-off is added back to income.
Switching methods later	The choice made in the first year limits the user later. After a first-year write-off, the vehicle cannot move to the mileage rate.
Forgetting the sale	Plan for the income in the year of the sale or trade, because the write-off lowered the basis.
Using curb weight	The test uses gross vehicle weight, which is on the door sticker.
Counting the commute	Driving between home and a regular place of work does not count.
Personal use of a company vehicle left off the W-2	Value the personal use and report it as wages.
Five or more vehicles on the mileage rate	The mileage rate is not available when five or more vehicles are in use at the same time.

Risks and trade-offs

Tell the user about these plainly.

Timing - the first-year write-off moves deductions into year one, and the user gives most of it back as income when the vehicle is sold
First-year choice - the method used in the first year limits the user later. After a first-year write-off, the vehicle cannot move to the mileage rate.
Business use - a write-off depends on business use staying over 50%. A drop below that adds income in the year it happens.
Records - a vehicle is listed property, and the substantiation rules are strict. A deduction with no mileage log is easy to lose.
Cash - a deduction only saves the user their tax rate, so most of the price is still money spent
Leases - a leased vehicle follows different rules, and this guide does not cover them
State income tax - some states do not follow federal bonus depreciation. Look up the user's state.
Changing figures - the mileage rate changed in the middle of 2026. Use the rate for the months the miles were driven.

Stop signs

If any of these is true, tell the user that a credentialed tax professional should review the plan before the vehicle is bought or the return is filed.

The user is buying a vehicle mainly for the deduction
Business use is near 50%, or the user has no mileage log
The vehicle is leased
The vehicle was used personally before it was used for the business
The vehicle is already in service and the user wants to change methods
The business owns the vehicle and the owner also drives it personally
The user plans to sell or trade the vehicle within a year or two
The business uses five or more vehicles
The user is in a state with its own depreciation rules
The business has a loss for the year

Who wrote this, and how to get help

I am Ryan Voight, an IRS Enrolled Agent. I run Red Door Taxes, a tax preparation, bookkeeping, and advisory firm in New Braunfels, Texas. We run this comparison for clients as a paid service. We do it before the client buys, set up the mileage log, and handle the depreciation and the sale on the return. We also prepare the business and personal returns that go with it. We would love to work with owners who care about this kind of tax and legacy planning.

Page for people, with the calculator: https://www.reddoortaxes.com/strategies/vehicles
Book a consultation: https://calendly.com/ryan-reddoor/paid-consultation?utm_source=assistant-guide&utm_campaign=vehicles
Phone: 830-402-4152
Email: [email protected]

Sources

IRS Publication 463, Travel, Gift, and Car Expenses: https://www.irs.gov/publications/p463
IRS, Standard mileage rates: https://www.irs.gov/tax-professionals/standard-mileage-rates
26 U.S.C. § 274, substantiation: https://www.law.cornell.edu/uscode/text/26/274
26 U.S.C. § 280F, limits on depreciation for vehicles and listed property: https://www.law.cornell.edu/uscode/text/26/280F
IRS Publication 946, How To Depreciate Property: https://www.irs.gov/publications/p946
Rev. Proc. 2026-15, depreciation limits for vehicles placed in service in 2026: https://www.irs.gov/pub/irs-drop/rp-26-15.pdf
IRS, guidance on the additional first year depreciation deduction: https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill
IRS Notice 2026-10, standard mileage rates for 2026: https://www.irs.gov/pub/irs-drop/n-26-10.pdf
IRS Publication 544, Sales and Other Dispositions of Assets: https://www.irs.gov/publications/p544
IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits: https://www.irs.gov/publications/p15b

Disclaimer

This guide is for educational purposes only. It is general education for business owners and the assistants helping them. It is not tax, legal, or accounting advice for any specific situation. Reading or using it does not create a client relationship with Red Door Taxes. Figures are for tax year 2026 and change every year. The vehicle, the records, the state, and the facts all change the result.