VEHICLE DEDUCTIONS
The first-year write-off is mostly timing
Bottom line: the first-year write-off on a heavy truck is real, but it is mostly timing. Part of it comes back as income when you sell, and the rest is depreciation you would have taken in later years anyway. Take a $60k truck over 6,000 pounds that you drive 15,000 miles a year, 12,000 of them for the business, which is 80 percent business use. It costs $7k a year to run. If you deduct actual costs, you write off about $54k in the first year, which is $48k of depreciation plus $5.6k of running costs. If you use the mileage rate at 76 cents, you deduct about $9k.
Now say you keep the truck for five years and then sell it for $25k. Your five-year totals are about $56k with actual costs and about $53k with the mileage rate, so the two methods end up about $3k apart. The version you see on social media only shows you the first year. In our opinion, you should pick the method for the whole time you will own the vehicle, and you should not buy a vehicle because of the deduction.
Which method is better for you?
Enter the vehicle and how you use it, and the calculator will show both methods for the first year and for the whole time you own the vehicle. Nothing you enter here is saved or sent anywhere. Treat the result as an educational estimate, and bring us your facts before you act on it.
Your vehicle
This year’s figures
The 2026 mileage rate is 72.5 cents through June and 76 cents from July. The yearly limits for lighter vehicles are the 2026 amounts.
The two methods
| Deduction | Mileage rate | Actual costs |
|---|---|---|
| Year one | $0 | $0 |
| While you own it | $0 | $0 |
| Added back or deducted at the sale | $0 | $0 |
| Total after the sale | $0 | $0 |
| Tax saved at your bracket | $0 | $0 |
Year one, and after the sale
| Method | Deductions |
|---|
The rule underneath all of it
There are two ways to deduct a business vehicle. With the mileage rate, you multiply your business miles by the IRS rate, which is 76 cents a mile right now. That rate already covers fuel, insurance, repairs, and depreciation. You add business parking and tolls, and if you are self-employed, you also add the business share of the interest on a car loan and of the personal property tax on the vehicle. With actual costs, you add up what the vehicle really cost to run, take the business share, and then add depreciation.
You make the choice in the first year you use the vehicle for business, and it limits what you can do later. If you want the mileage rate on a vehicle you own, you have to start with it in year one. If you take the first-year write-off instead, you cannot switch that vehicle to the mileage rate in a later year.
Over 6,000 pounds
No yearly limitA pickup, van, or SUV with a gross vehicle weight over 6,000 pounds has no yearly limit on depreciation. If you bought it after January 19, 2025, from someone who is not related to you, and you use it more than 50 percent for business, you can usually deduct the business share of the price in the first year.
6,000 pounds or less
Yearly limitsA car, crossover, or light truck has a limit on depreciation each year. For a vehicle you start using in 2026, the first-year limit is $20,300 if you take the first-year write-off and $12,300 if you do not. The limits for the following years are $19,800, $11,900, and then $7,160 a year. You multiply each one by your business-use percentage.
Business use of 50 percent or less
No first-year write-offYou cannot take the first-year write-off, and depreciation is spread evenly over the years. The mileage rate is usually simpler at this level of use. One more thing: if your business use drops to 50 percent or less in a later year, you have to add part of an earlier write-off back to income.
The sale takes back part of the write-off
Depreciation lowers your basis in the vehicle, which is the amount the tax law treats you as still having in it. When you sell or trade the vehicle, the business share of anything you get above that basis is income. So if you wrote off the whole truck and then sell it for $25k, the business share of that $25k is taxable in the year you sell.
The mileage rate does the same thing on a smaller scale, because 35 cents of each mile counts as depreciation in 2026.
Here is what that means over the whole time you own the vehicle. Once you count the sale, depreciation ends up about the same under both methods, so the real difference is your running costs. The mileage rate allows 41 cents a mile for them. If you spend more than that for each business mile, actual costs come out ahead, and if you spend less, the mileage rate does. This is a rule of thumb, because it ignores the value of deducting sooner, changes in your tax rate or in the mileage rate, and loan interest.
If you work for your own S corporation
If the vehicle is in your own name, your corporation usually reimburses your business miles at the mileage rate under an accountable plan, and you do not choose a method on your own return. In our opinion, that is the simplest way. The corporation can instead reimburse the business share of your actual costs, but then you need a receipt for every cost and a depreciation schedule for the vehicle.
If the corporation owns the vehicle, it can use either method on its return. Your personal use of that vehicle is a taxable benefit, so it has to be valued and added to your W-2.
Setup, and what you keep
When you buy
- Check the gross vehicle weight on the door sticker
- Keep the purchase documents, and note the date you first used it for business
- Method - choose it before you file for the first year
- Start the mileage log on the first day
All year
- Log each business trip, with the date, destination, purpose, and miles
- Record the odometer at the start and the end of the year
- Keep receipts for running costs, if you use actual costs
- Keep parking and toll receipts under either method
What goes wrong
You can do the version you see on social media and risk having it thrown out on audit. Or you can frame it up so it stays effective. Here is what the first version looks like.
| The mistake | The fix |
|---|---|
| Buying a vehicle for the deduction | A deduction only saves you your tax rate. If you are in the 24 percent bracket, a $60k truck still costs you about $46k. |
| No mileage log | Both methods depend on your business miles, so log each trip when it happens. |
| A write-off at 50 percent business use or less | You cannot take it. If your use drops to 50 percent or less later, part of the write-off is added back to your income. |
| Switching methods later | The choice you make in the first year limits you later. After a first-year write-off, you cannot move that vehicle to the mileage rate. |
| Forgetting the sale | Plan for the income in the year you sell or trade, because the write-off lowered your basis. |
| Using curb weight | The test uses gross vehicle weight, which is on the door sticker. |
| Counting the commute | Driving between your home and your regular place of work does not count. |
| Personal use of a company vehicle left off the W-2 | Value your personal use and report it as wages. |
| Five or more vehicles on the mileage rate | You cannot use the mileage rate when you use five or more vehicles at the same time. |
Working through this with an AI assistant?
Paste this into Claude, ChatGPT, or whichever assistant you use. It points your assistant at our full guide to this strategy, which covers the rules and their sources, this year’s figures, the setup steps, the paperwork, and the risks. It also tells the assistant when to send you to a professional. Nothing is held back.
Read https://www.reddoortaxes.com/guides/vehicles.md from Red Door Taxes. I use a vehicle in my business and I want to choose between the mileage rate and actual costs. Using that guide, ask me its intake questions one at a time, compare both methods for the first year and for the whole time I will own the vehicle, and tell me what records I need. Tell me plainly when the guide says to stop and get a professional.
The guide is a plain page that anyone can read: open the guide. It states the same rules and the same figures as this page, with a source for each. All of our guides are listed in one place.
We run this comparison before our clients buy
The right method depends on the vehicle, how you use it, and how long you plan to keep it. Everything you need to work it out yourself is on this page, and nothing is held back. If you would rather hand it off, implementation is a paid service. We run the comparison before you buy, set up your mileage log, and handle the depreciation and the sale on your 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.
Book a consultationFor educational purposes only. This page and its calculator are general education for business owners. They are not tax, legal, or accounting advice for your specific situation, and reading them does not create a client relationship with Red Door Taxes. The calculator estimates federal income tax only. It ignores state income tax, self-employment tax, and interest on a vehicle loan. It treats the mileage rate and your running costs as the same every year, and it does not cover leased vehicles. It does not discount later years, it simplifies depreciation in the year of the sale, and it taxes a gain or loss on the sale as ordinary income at your current bracket. It also assumes the first-year write-off on a heavy vehicle comes from bonus depreciation, so it does not apply the section 179 limit for heavy SUVs. Your vehicle, your records, and the current year’s figures all change the result. Nothing you enter in the calculator is saved or transmitted. Bring us your facts before you act on any of it.
Tell us what you need.
You send us a short inquiry, and we contact you about next steps. If you would rather talk first, you can book a consultation, which runs 55 minutes and costs $500.