Can You Deduct 100% of the Cost of a New Vehicle?

Believe it or not, potentially yes! But beware; there are rules and limitations that apply to deductions based on the facts. But for once, the social media tax experts are on to something! Keep reading to find out how you can write off the purchase of a new vehicle.

Vehicles purchased and placed into service this year (2026) can qualify for up to a 100% tax write-off, as long as the Gross Vehicle Weight Rating (GVWR) exceeds 6,000 pounds. Vehicles with a GVWR less than 6,000 pounds can still qualify for accelerated depreciation, but you won’t be able to write off up to 100% of the cost. This is the reason most dentists and doctors choose to purchase qualifying SUVs with a GVWR of 6,000 pounds or more.

To qualify for increased deductions under Section 179 and Bonus Depreciation under Section 168(k), the vehicle must be used more than 50% for business. Moreover, you need to be able to prove the vehicle use through a mileage log. We recommend utilizing a tracking app such as MileIQ to track all trips. However, the IRS states that your commute doesn’t count towards business mileage! This applies even if you stop by the bank, store, post office, etc., on the way to or from your office. Therefore, the distance between your house and your office should always be considered personal mileage.

Trips that can be considered business use include travel to necessary business events such as continuing education, business meetings, referring dentist events, as well as trips to banks, stores, etc., that are not part of your daily commute. Dentists who own multiple locations are allowed to count the additional mileage as business use. Many dentists don’t properly understand the rules and assume that because they live only two miles from their office they don’t qualify. Actually, the opposite is true! If your commute is 30 miles each way, it may be difficult to pass the 50% business use test, but dentists that commute a short distance will have a much easier time justifying more than 50% business use. Dentists should keep a detailed mileage log for at least one month each year in case of an audit.

All expenses related to the use of a company vehicle should be paid for by your practice. This includes maintenance, fuel, insurance, taxes, tires, repairs, etc. Your CPA will help you claim the adequate amount of expenses based on your percentage of business use versus personal use. If you utilize a personally owned vehicle for business use, you can also reimburse yourself tax-free using the standard mileage rate for any business trips taken. Be sure to track the business mileage to maximize your tax-free reimbursement even if you don’t own a vehicle through your business!

The savings largely depend on how your CPA accounts for personal mileage. However, as a rule of thumb, you should expect to receive a tax deduction in the same percentage as your business use. For example, if you purchase a $100,000 vehicle and use it 70% for business, you could receive a $70,000 tax deduction. Assuming a combined federal and state income tax rate of 40%, this could save you $28,000 in taxes.

There are two ways to purchase the vehicle: purchase the vehicle in the company name or utilize an Agency Agreement between the corporation and the owner (you) and purchase the vehicle in your personal name. Often, the agency agreement is preferrable, as titling a vehicle in your business name will require a separate auto insurance policy, which can be costly. Since this separate policy won’t alleviate your need for a personal policy (unless you’re single), your auto insurance costs could double! Additionally, we recommend purchasing the vehicle using a five-year loan at the lowest possible interest rate. The lowest rates are usually available through a local credit union, not the finance department of the dealership. Be certain to get preapproved prior to entering a dealership and shop prices at multiple dealers for the best deal! Lastly, contact your CPA ahead of time to make sure you qualify and follow the proper steps.

Wrapping Your Vehicle: Using your vehicle as a moving billboard doesn’t change the use from personal to business in the eyes of the IRS. Mileage still needs to be tracked and accounted for under the same methods.

Hauling Equipment Back and Forth: Many dentists, especially orthodontists, will haul a scanner back and forth between offices to avoid the high costs of having two iTero scanners. Unfortunately, the IRS only allows you to deduct any additional costs of hauling the scanner, which may include additional equipment needed such as a truck bed cover to keep the equipment safe.

Claiming Your Office Is Your Home: While this can be theoretically possible, it’s unlikely for most dentists to qualify. Publication 587 explains that your home must be the exclusive and regular place of business for all administrative and management activities of your business. Since most dentists have an office at their practice and perform at least some administrative duties from their office, they will likely fail this test. However, dentists that moonlight as contractors at different offices very well may qualify and be able to deduct their mileage to and from different offices.

If you want to hear more from Wes and Mario on business vehicle deductions, watch our short explainer video on YouTube, or listen to the audio versions on Apple Podcasts or Spotify.

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