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Own a small business? Consider becoming our retainer client. This page is general; as a retainer client you get information that is specific to your own tax situation, ideally before you buy or lease. Contact us.
Own a small business? Consider becoming our retainer client. This page is general; as a retainer client you get information that is specific to your own tax situation, ideally before you buy or lease. Contact us.
Business Vehicles: Buy or Lease, Deductions and Rules
A truck, van or car is one of the biggest purchases a small business makes, and one of the most audited deductions. The tax result depends on whether you buy or lease, how much of the use is for business, the weight of the vehicle and how well you keep records. Here is the short version for 2026.
The 2026 numbers in brief
| What | 2026 |
|---|---|
| Business mileage rate | 72.5 cents a mile for January to June 2026 and 76 cents from July 1 (IRS Notice 2026-10 and the July 2026 increase) |
| First-year depreciation cap, car of 6,000 pounds or less | $20,300 with bonus depreciation, $12,300 without (IRS Rev. Proc. 2026-15). The cap is multiplied by your business-use percentage. |
| Section 179 cap for most SUVs over 6,000 pounds | $32,000 (IRS Rev. Proc. 2025-32). 100% bonus depreciation is available for qualifying property acquired after January 19, 2025. |
| Lease inclusion amount applies if the vehicle is worth more than | $62,000 on the first day of a lease that starts in 2026 (IRS Rev. Proc. 2026-15) |
| Business use needed for bonus depreciation and Section 179 | More than 50% |
Buy or lease at a glance
- Buy. You deduct depreciation on the business share of the cost. A car of 6,000 pounds or less has yearly dollar caps. A heavier vehicle can often be written off much faster, with bonus depreciation or Section 179, if you use it more than 50% for business.
- Lease. You deduct the business share of the lease payments. If the vehicle is worth more than $62,000 at the start of a 2026 lease, a small “inclusion amount” reduces the deduction.
- Mileage rate or actual costs. The mileage rate is simple, but the first-year choice can lock you in: once you use accelerated depreciation on a car, you cannot use the mileage rate on it. On a lease, the mileage rate must be used for the whole lease.
- Selling. The part of a gain that comes from depreciation you took is taxed as ordinary income.
Business use and records
- Only the business share counts. Driving between home and your regular workplace is commuting and is never deductible.
- Keep a log: date, miles, destination and business purpose for each business trip, plus the total miles for the year. Estimates are not allowed.
- If business use drops to 50% or less in a later year, part of an earlier accelerated deduction is added back to income.
- The federal electric-vehicle credits ended for vehicles acquired after September 30, 2025.
If you own a small business
- Sole proprietors and single-member LLCs deduct vehicle costs on Schedule C: the mileage rate or actual costs.
- S and C corporation owners who are employees cannot deduct unreimbursed driving on their personal return. A common fix is an accountable plan, under which the business reimburses business mileage.
- If the business owns or leases the vehicle, personal use by an owner or employee is a taxable benefit: its value is included in wages, or the person pays it back.
- A heavy-vehicle purchase is a year-end planning item. The weight, the 50% test and your income decide the result. See year-round tax planning.
Read the full guide, with every table and worked examples, on SmallTax.com: Business vehicle tax guide.
Official sources
- IRS Publication 463: Travel, gift, and car expenses
- IRS Notice 2026-10: 2026 standard mileage rates
- IRS Rev. Proc. 2026-15: 2026 depreciation caps and lease inclusion table
- IRS Rev. Proc. 2025-32: 2026 inflation adjustments (Section 179)
- IRS: Instructions for Form 4562
This article is general education, not tax, legal or investment advice. Mileage rates, caps and limits change; the figures above are for 2026 and were checked against the IRS sources listed on October 20, 2026. Verify current figures with the IRS or a qualified tax professional before acting.