If you used one or more vehicles in your business during 2026, you may be eligible for expanded tax deductions. Under the latest laws, businesses can generally deduct expenses attributable to business use plus depreciation. While the rules remain complex, the 2026 thresholds are significantly more taxpayer-friendly than in recent years.
Actual Expenses Plus Depreciation
The year you place a vehicle in service, you can choose to deduct the actual expenses attributable to your business use or claim the cents-per-mile deduction. Deductible actual expenses include gas, oil, tires, insurance, repairs, licenses, and registration fees.
If you choose the actual expense method, you can also claim depreciation. For 2026, the general MACRS depreciation percentages (assuming >50% business use) are:
Year 1: 20%
Year 2: 32%
Year 3: 19.2%
Year 4: 11.52%
Year 5: 11.52%
Year 6: 5.76%
Note: If business use is 50% or less, you must use the straight-line method (10% in Years 1 and 6; 20% in Years 2–5).
2026 “Luxury Auto” Depreciation Ceilings
For passenger autos (under 6,000 lbs.) placed in service in 2026, the IRS has adjusted the “luxury auto” limits for inflation. These caps represent the maximum depreciation you can take:
| Year | With Bonus Depreciation | Without Bonus Depreciation |
| Year 1 | $20,300 | $12,300 |
| Year 2 | $19,800 | $19,800 |
| Year 3 | $11,900 | $11,900 |
| Remaining Years | $7,160 | $7,160 |
Section 179 and Bonus Depreciation for Heavy Vehicles
The most significant updates for 2026 come from the OBBB legislation, which increased the Section 179 limits and reinstated 100% bonus depreciation.
100% Bonus Depreciation: For 2026, qualified vehicles (generally those with a GVWR over 6,000 lbs.) can once again qualify for a full 100% first-year write-off of the business portion of the cost.
Section 179 Limit: The maximum total Section 179 deduction for 2026 has increased to $2,560,000.
Heavy SUV Limit: For SUVs and certain other vehicles rated between 6,001 and 14,000 pounds, the Section 179 limit has been adjusted to $32,000. However, many businesses may opt for the 100% bonus depreciation instead, which is not subject to this specific dollar cap.
The Cents-Per-Mile Method
For many small business owners, the standard mileage rate is the simplest path.
2026 Business Mileage Rate: 72.5 cents per mile (up from 67 cents in 2024 and 70 cents in 2025).
Coverage: This rate applies to gasoline, diesel, electric, and hybrid-electric vehicles.
Requirements: You must keep a contemporaneous log of your business mileage, including the date, destination, and business purpose of each trip.
Choosing or Changing Your Method
If you want to use the cents-per-mile method, you must choose it in the first year the vehicle is available for business use. In later years, you can switch from the mileage rate to actual expenses (using straight-line depreciation), but you generally cannot switch from the actual expense method to the mileage rate for the same vehicle.
Tax laws are subject to change, and individual circumstances vary. Contact our office for a personalized consultation on how to maximize your 2026 vehicle deductions and ensure your mileage logs meet IRS “listed property” requirements.