2026 Tax Code Section 179, Bonus Depreciation and Car-Loan Interest Guide

2026 Tax Code Section 179, Bonus Depreciation and Car-Loan Interest Guide 

IMPORTANT MESSAGE TO ALL READERS AND CAR PRO SHOW LISTENERS
FROM JERRY REYNOLDS, THE CAR PRO

Friends, we have been publishing the latest Section 179 rules and an eligible-vehicle guide for more than a decade. I encourage you to reach out to one of our Certified Car Pro Friends at a CarPro-approved dealership. They can help you find the eligible vehicle you want - but always verify the exact vehicle's GVWR on its federal certification label and consult your tax professional before buying.

For Self-Employed People and Business Owners

Below is our annual guide to Internal Revenue Code Section 179 for self-employed people and business owners who purchase a vehicle. It covers qualifying vehicles purchased and placed in service during the 2026 calendar year, along with 2026 bonus-depreciation rules and the separate personal-use car-loan-interest deduction.

Tax Code Section 179

Section 179 allows a business to elect to expense the cost of qualifying property in the year it is placed in service. The One Big Beautiful Bill Act of 2025 substantially increased the deduction limits.

For tax years beginning in 2026, a business may expense up to $2,560,000 of qualifying property. This can include new and used machinery, heavy equipment, furniture and fixtures, and certain vehicles. The property must be purchased and placed in service by Dec. 31, 2026, for a calendar-year taxpayer to claim it on a 2026 return.

Important limitations and considerations include:

• The deduction begins to phase out when total Section 179 property placed in service during the year exceeds $4,090,000. The deduction is reduced dollar for dollar above that threshold and is fully phased out at $6,650,000.
• The Section 179 deduction is generally limited to taxable income from the active conduct of trades or businesses. An amount disallowed by that income limit may generally be carried forward.
• A vehicle must be placed in service by Dec. 31, 2026, for a calendar-year taxpayer to claim the deduction for 2026.
• The vehicle must be used more than 50% for qualified business use.
• Only the business-use percentage of the vehicle's cost is eligible for the calculation.
• If business use later falls to 50% or less, some previously claimed depreciation may have to be recaptured as income.
• For 2026, the separate Section 179 limit for certain SUVs and other passenger-type vehicles rated above 6,000 pounds but not above 14,000 pounds GVWR is $32,000. The comparable 2025 limit was $31,300.

Bonus Depreciation

Bonus depreciation allows a business to deduct a specified percentage of the adjusted basis of qualifying property in the year the property is placed in service. Unlike Section 179, it is not subject to the overall Section 179 dollar limit or its taxable-income limitation, although other tax rules may still limit the benefit.

The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualifying property acquired after Jan. 19, 2025, and placed in service after that date. Qualifying new and certain used vehicles acquired after Jan. 19, 2025, and placed in service during 2026 can therefore be eligible for 100% bonus depreciation. Property acquired before Jan. 20, 2025, and first placed in service in 2026 generally remains under the former phase-down schedule, which provides a 20% bonus rate for 2026.

The $32,000 Section 179 heavy-SUV limit does not cap bonus depreciation. Depending on business-use percentage and the taxpayer's circumstances, a business may claim Section 179 first and then apply 100% bonus depreciation to the remaining eligible basis, or use bonus depreciation without a Section 179 election.

Vehicle Limitations

All vehicle deductions are limited by qualified business use. More than 50% business use is required for Section 179 and bonus depreciation. The dollar limits discussed below assume 100% business use and are reduced proportionately when business use is lower.

Passenger Automobiles and Lighter Vehicles

For a passenger automobile placed in service during 2026, the maximum first-year depreciation deduction is $20,300 when bonus depreciation applies and $12,300 when bonus depreciation does not apply. These are first-year depreciation limits, not a promise that every taxpayer will receive the maximum deduction.

Heavy SUVs, Pickups and Vans

For trucks, vans and truck-classified SUVs, the key threshold is a manufacturer-certified GVWR above 6,000 pounds - in other words, at least 6,001 pounds. GVWR is the maximum allowable loaded weight, not the vehicle's curb weight. The federal certification label on the exact vehicle is the controlling source.

The $32,000 Section 179 cap generally applies to four-wheeled vehicles rated above 6,000 pounds but not above 14,000 pounds GVWR that are primarily designed or used to carry passengers. The cap generally does not apply to a vehicle that:

• Is designed to seat more than nine passengers behind the driver's seat;
• Has an open cargo area, or a cap-enclosed cargo box, at least 6 feet in interior length that is not readily accessible from the passenger compartment; or
• Has an integral enclosure fully enclosing the driver compartment and load-carrying device, no seating behind the driver, and no body section extending more than 30 inches ahead of the windshield.
• That means many long-bed pickups, cargo vans and true commercial vehicles can avoid the $32,000 SUV cap, while short-bed crew-cab pickups may remain subject to it. Bonus depreciation can still apply to the remaining eligible basis. If Section 179 or accelerated depreciation is used, the standard mileage method cannot be used for later periods for that vehicle; actual vehicle expenses must be tracked.

Standard Mileage Method

The standard mileage method can be used instead of depreciating the vehicle and deducting actual operating costs. It is often simpler because the deduction is based on qualified business miles rather than separate records for fuel, oil, tires, insurance, repairs and similar expenses. A contemporaneous mileage log is still essential.

For business miles driven from Jan. 1 through June 30, 2026, the standard mileage rate is 72.5 cents per mile. The IRS increased the rate to 76 cents per mile for business miles driven from July 1 through Dec. 31, 2026. The 2027 rate will be announced later in 2026.

A taxpayer cannot double dip by using the standard mileage rate and also deducting the operating costs already built into that rate. The business mileage rates apply to gasoline, diesel, hybrid and electric vehicles.

Car-Loan Interest Deduction - Personal-Use Vehicles

This is a separate deduction from the business-vehicle deductions discussed above. Final regulations issued by the Treasury Department and IRS take effect Nov. 9, 2026, but the deduction applies to qualifying loans incurred after Dec. 31, 2024, for tax years 2025 through 2028.

An individual may deduct up to $10,000 per federal tax return each year in qualified passenger-vehicle loan interest, whether the taxpayer itemizes deductions or takes the standard deduction. The $10,000 limit applies per return—not per vehicle—and interest paid on multiple qualifying vehicle loans may be combined before applying the limit.

To qualify, the loan must be secured by a first lien on a new vehicle purchased for personal use. At the time the loan is incurred, the taxpayer must reasonably expect more than 50% of the vehicle’s use to be personal. A vehicle expected to be used partly for business may therefore qualify, provided expected personal use exceeds 50%.

Interest attributable to business use may qualify either as qualified passenger-vehicle loan interest or as separately deductible business interest, subject to the applicable tax rules. The same interest cannot be deducted twice. Taxpayers with mixed personal and business use should consult a qualified tax professional to determine the most advantageous and appropriate treatment.

The vehicle’s original use must begin with the taxpayer, its GVWR must be less than 14,000 pounds, and final assembly must occur in the United States. Used vehicles and leased vehicles do not qualify. However, a dealer demonstrator that was held primarily for sale to customers may qualify as a new vehicle, even if the dealer previously titled or registered it, provided the purchaser’s loan documents treat it as new. A dealer loaner or service vehicle generally will not qualify because its original use began with the dealership.

Interest attributable to amounts financed for certain items directly related to the vehicle purchase may qualify. These items can include sales taxes, title and registration fees, service or repair plans, extended warranties, vehicle-protection products, GAP coverage, qualifying credit-insurance products, key-fob replacement plans and vehicle accessories included in the purchase transaction.

Interest attributable to negative equity rolled over from a trade-in does not qualify. Interest associated with unrelated property or services, such as a trailer or boat; ordinary collision or liability insurance; or cash proceeds paid directly to the borrower also does not qualify. When a loan includes both qualifying and nonqualifying amounts, the interest must generally be allocated proportionately.

The vehicle identification number must be included on the taxpayer’s federal income-tax return. Interest on a qualifying refinancing may remain eligible, but generally only to the extent that the new loan does not exceed the outstanding balance of the original qualifying vehicle loan at the time of refinancing.

The deduction is reduced by $200 for every $1,000—or portion of $1,000—by which modified adjusted gross income exceeds $100,000 for taxpayers using any filing status other than married filing jointly, or $200,000 for married couples filing jointly.

Taxpayers should verify the vehicle’s final-assembly location using the vehicle information label or the NHTSA VIN decoder. Because eligibility and the amount of the deduction depend on the particular loan, vehicle, income and vehicle-use circumstances, always consult a qualified tax professional.

Vehicles With a GVWR of at Least 6,001 Pounds

The IRS does not publish an official make-and-model list. The roster below is a current quick reference for U.S.-market vehicles available during the 2026 calendar year, including early 2027 models. A model is included only when at least one current configuration has a manufacturer-rated GVWR of 6,001 pounds or more.

IMPORTANT: A dagger (†) means only certain trims, drivetrains, cab/bed combinations, battery versions or option packages clear 6,000 pounds. Even without a dagger, check the federal certification label on the exact vehicle before purchase. Model-year changes can alter GVWR, so never assume that the prior or following model year has the same rating.

Click here to see the below table as a PDF →

Pickup and Van Reminder

All traditional half-ton and heavier full-size pickups from Chevrolet, Ford, GMC, Ram and Toyota clear the 6,000-pound threshold, but bed length and body configuration determine whether the $32,000 Section 179 passenger-vehicle cap applies. Midsize pickups are far more configuration-sensitive. For commercial vans, passenger seating and cargo-body design also affect the cap even when GVWR exceeds 6,000 pounds.

Models Removed From the Prior List

Discontinued or legacy names were removed from the current-model roster, including the Audi e-tron/Q8 e-tron, Bentley Mulsanne, Dodge Grand Caravan, Infiniti QX56, Mercedes-Benz Metris, Nissan NV/NVP and Nissan Titan. The Land Rover Range Rover Evoque and Range Rover Velar, Chevrolet Trailblazer, and Subaru Ascent were also removed because current ratings reviewed do not exceed 6,000 pounds; the Ascent is rated at 6,000 pounds, which is one pound short of the required 6,001-pound threshold. Used examples of discontinued models can still qualify if the exact vehicle's certification label shows a GVWR of at least 6,001 pounds and all other tax requirements are met.

Disclaimer - Please Read

Tax laws and vehicle specifications are complicated and can change. Vehicle eligibility also depends on model year, trim, drivetrain, cab, wheelbase, bed, seating, battery and option packages. While every effort was made to make this guide accurate and complete, Car Pro Radio Network, CarPro and their affiliates are not responsible for errors or omissions. Always verify the exact vehicle's federal certification label and consult a qualified tax professional before making a purchase or claiming a deduction.

Primary Sources Used for Research

• IRS Publication 946, How To Depreciate Property
• IRS Revenue Procedure 2025-32 - 2026 inflation adjustments
• IRS Revenue Procedure 2026-15 - 2026 passenger-auto depreciation limits
• IRS standard mileage rates
• IRS guidance on the personal-use car-loan-interest deduction
• NHTSA VIN decoder

A VERY SPECIAL THANK YOU TO Mr. Bill Caton, a CPA who did the heavy lifting on these changes!