Bonus Depreciation & Vehicle Write-Offs for 2025
What Business Owners Should Understand Before Buying
A major shift in tax law has arrived for business owners. With the passage of the One Big Beautiful Tax Bill, 100% bonus depreciation has been reinstated beginning in 2025, reopening one of the most powerful deductions available for vehicles, equipment, and machinery.
For contractors, real-estate professionals, consultants, and gig workers, this creates a significant opportunity to reduce taxable income when large purchases are planned correctly.
Why 2025 Is a Big Year for Depreciation Planning
Under current law, qualifying assets placed in service after January 19, 2025 are eligible for full bonus depreciation. This means the entire cost of certain purchases can be deducted in the same year rather than spread out over several years.
Key benefits include:
- Immediate tax savings
- Improved cash flow
- The ability to generate losses for strategic tax offsetting
How Bonus Depreciation Works
Bonus depreciation allows businesses to deduct 100% of the cost of qualifying property in the year it’s placed in service.
For 2025:
- The deduction applies to new and used assets (as long as they’re new to you)
- The deduction can create or increase a net operating loss
This flexibility makes bonus depreciation one of the most valuable tools in the tax code.
Where Section 179 Fits In
Although bonus depreciation often gets the headlines, Section 179 is applied first and plays a critical role in vehicle planning.
Section 179 Limits for 2025
- Maximum annual deduction: $1.22 million
- Phaseout begins at $3.05 million of total purchases
- Business use must exceed 50%
- SUVs between 6,000 and 14,000 lbs are capped at $31,300
- Heavy trucks and vans generally avoid this cap
After Section 179 is applied, bonus depreciation picks up any remaining cost.
Vehicle Weight: The Most Important Factor
Vehicle deductions depend heavily on Gross Vehicle Weight Rating (GVWR). The IRS treats vehicles differently based on weight:
Under 6,000 lbs
- Subject to luxury auto depreciation limits
- Roughly $20,200 maximum deduction in year one
6,001–14,000 lbs
- Section 179 deduction capped at $31,300
- Remaining cost eligible for 100% bonus depreciation
Over 14,000 lbs
- Generally eligible for full expensing
- No luxury auto or SUV caps apply
This is why certain SUVs, vans, and trucks are commonly used in tax planning.
Practical Examples (Illustrative)
Real Estate Professional Purchases a Large SUV
A real-estate professional purchases a qualifying SUV with a GVWR just over 6,000 lbs for business use. A portion of the cost is deducted under Section 179, with the remainder fully expensed using bonus depreciation.
The result is a full first-year write-off and improved cash flow.
Trade Business Buys a Heavy-Duty Truck
A contracting business acquires a commercial truck exceeding 14,000 lbs. Because the vehicle avoids luxury auto limits and SUV caps, the entire purchase price is deducted in the year it’s placed in service.
This strategy is especially beneficial for construction, landscaping, and transportation businesses.
Consultant Buys a Passenger Vehicle
A consultant purchases a midsize sedan used primarily for business. Since the vehicle falls under 6,000 lbs, depreciation limits apply, spreading deductions over multiple years.
This example highlights why vehicle selection matters as much as timing.
Can Vehicle Deductions Offset W-2 Income?
In many cases, yes.
For sole proprietors and single-member LLCs, large vehicle deductions can generate a Schedule C loss that reduces overall adjusted gross income (AGI).
When filing jointly, this loss may offset:
- W-2 income from the business owner
- W-2 income from a spouse
- Other taxable income sources
When structured correctly, this strategy can convert a tax bill into a refund.
Final Takeaway
With 100% bonus depreciation restored, 2025 presents a rare opportunity to deduct the full cost of qualifying vehicles and equipment — but only when the rules are followed carefully.
Vehicle weight, business-use percentage, entity structure, and timing all matter. Poor planning can limit deductions, while proper structuring can significantly reduce your tax liability.