What does placed in service mean for a vehicle?
Placed in service means the vehicle is ready and available for its business use. For a truck or SUV, that usually means you have taken delivery, it is titled and insured, and you could drive it for work. A vehicle on order, in transit or sitting at the dealer on December 31 belongs to next year.
This is the rule that catches people in late December. The purchase date, the payment date and the date on the sales contract do not decide the year. Delivery and availability do.
If a dealer promises delivery the last week of December, get it in writing and keep the delivery paperwork with your tax records. If delivery slips to January 2, the deduction slips with it.
Why does the 6,000 pound line matter?
Passenger vehicles with a gross vehicle weight rating of 6,000 pounds or less are subject to annual depreciation caps, often called the luxury auto limits. Vehicles over 6,000 pounds GVWR are not subject to those caps, so much more of the cost can be deducted in the first year.
The number that matters is the gross vehicle weight rating on the sticker inside the driver's door jamb, not the curb weight in the brochure. Many full size pickups and large SUVs are over the line. Many crossovers are not.
Heavy SUVs have one more wrinkle: a separate, lower Section 179 cap that is adjusted for inflation each year ($32,000 for 2026). Bonus depreciation can often cover more of the cost on top of that, which is why the planning matters.
Is 100 percent bonus depreciation back?
Yes, for property acquired after January 19, 2025. The 2025 tax law made 100 percent bonus depreciation permanent for qualifying property acquired and placed in service after that date. It applies to business vehicles that meet the business use test, along with equipment and other qualifying property.
Bonus depreciation and Section 179 are two different tools. Section 179 is elective and limited by business income, while bonus depreciation is not limited by income. Which one fits depends on your profit, your entity and your state.
Taking a big first year deduction is not always the best move. If this year's income is low and next year looks bigger, spreading the deduction can save more. That is a projection question, not a rule.
What is the 50 percent business use test?
To use Section 179 or bonus depreciation on a vehicle, business use has to be more than 50 percent. Commuting does not count as business use. If business use later drops to 50 percent or less, part of the deduction you already took can come back as income, which is called recapture.
That makes a mileage log non negotiable. Write down the date, where you went, the business purpose and the miles. An app on your phone that runs in the background works fine, as long as you start it the day the vehicle goes into service.
Once you take Section 179 or bonus depreciation on a vehicle, you generally cannot switch that vehicle to the standard mileage rate later.
What about state taxes?
Not every state follows the federal rules. North Carolina, for example, does not fully follow federal bonus depreciation and requires most of it to be added back and deducted over later years. Your state return can look very different from your federal one.
If you live or work in more than one state, the timing gets more complicated. Run the numbers for both returns before you assume the federal savings show up everywhere.
Next step
Vehicle purchases are one of the year end moves we model in quarterly tax planning, so you know the real after tax cost before you sign. See our tax planning services, or book a free discovery call to talk through your situation.
Frequently asked questions
Can I deduct a vehicle I ordered in December but receive in January?
Not for this year. A vehicle counts in the year it is placed in service, which means delivered and ready for business use. If it arrives in January, the deduction belongs to next year.
Does a pickup truck count as a heavy vehicle?
Many full size pickups have a gross vehicle weight rating over 6,000 pounds, but not all. Check the sticker inside the driver's door jamb for the GVWR before you buy.
Can I use bonus depreciation if I lease the vehicle?
No. Bonus depreciation and Section 179 apply to vehicles you own, including ones bought with a loan. Lease payments are deducted differently, based on business use.
What happens if I sell the vehicle later?
If you took a large first year deduction, selling the vehicle can trigger depreciation recapture, which is taxed as ordinary income up to the depreciation you claimed. Plan for it before you trade in.