Should You Buy a Business Vehicle Before Year-End?

With the passage of the One Big Beautiful Bill (OBBB), business owners have a powerful new year-end tax planning opportunity: 100% bonus depreciation is back—and that means buying a business vehicle before December 31 could deliver a significant deduction on your 2025 tax return.

At Shifflett & Philips CPA, we’re spending a lot of time helping clients understand how these new rules impact their year-end planning. Here’s what business owners need to know.

100% Bonus Depreciation Is Back for 2025

After phasing down in recent years, the OBBB restored full, immediate expensing through 100% bonus depreciation for qualifying business assets—including many vehicles.

That means:

Buy a qualifying business vehicle before December 31 → deduct 100% of the purchase price on your 2025 return.

New or used. Financed or paid in cash. As long as it’s placed in service before year-end, the full deduction is available.

Which Vehicles Qualify?

Bonus depreciation rules depend on the type of vehicle you buy.

1. Heavy SUVs, Trucks, and Vans (GVWR > 6,000 lbs) - These are the biggest winners.

Examples include:• Cadillac Escalade• Chevy Tahoe / Suburban• Ford Expedition• Rivian R1S or R1T• Many 250/350 trucks and cargo vans

Tax impact: If GVWR is greater than 6,000 lbs and it’s used more than 50% for business, you can deduct 100% of the business portion of the purchase price.

Example: A $90,000 Escalade used 80% for business → $72,000 deduction in 2025.

2. Passenger Vehicles (< 6,000 lbs GVWR): Lighter vehicles have annual depreciation caps, but bonus depreciation still helps. For 2025, for a “luxury” passenger automobile or light truck with GVWR under 6,000 lbs, the maximum first-year depreciation deduction (when bonus depreciation is used) is $20,200.

Under OBBB, the first-year depreciation limit is significantly higher, giving you a faster, larger first-year write-off than before.

3. Electric Vehicles - EVs can qualify for bonus depreciation and potentially the clean vehicle credit.(But remember: The credit reduces basis before depreciation is calculated.)

What Counts as “Business Use”?

This is critical. You can only deduct the business-use percentage of the vehicle.

To deduct 100%, the vehicle must be used 100% for business—no personal errands, kids’ drop-offs, or weekend trips.

To stay compliant, keep:

• A mileage log (manual or app-based)

• Documentation showing business purpose

• Records of expenses if using actual costs

Does Financing Still Allow the Full Deduction?

Yes. Whether you pay in cash, finance, or lease, you can take the full bonus depreciation deduction in the year placed in service.

Many clients finance the vehicle and use the deduction to preserve cash while lowering their tax bill.

What If I Buy the Vehicle in December?

As long as it’s:

1. Purchased,

2. Placed in service, and

3. Available for business use

before December 31, you qualify for the 100% deduction.

Even December 30 or 31 counts—just make sure it’s delivered and available for use.

Should You Buy a Vehicle Before Year-End?

It depends on your situation, but Bonus Depreciation + Year-End Timing makes this a strong strategy if:

• Your business income is higher this year

• You expect to owe significant tax

• You already needed a vehicle in the next 6–12 months

• The vehicle is legitimately used for business

• You want to lock in the 100% deduction before rules change again

A Few Important Restrictions

Vehicles used less than 50% for business do not qualify for bonus depreciation.Also note:

• Commuting is not business use

• You must maintain adequate records

• Luxury auto limits apply for lighter vehicles

• May affect future gain if sold (recapture applies)

This is a powerful deduction—but it must be used correctly.

Example: Business Owner Tax Savings

A business purchases a $95,000 truck (GVWR 7,500 lbs) used 90% for business.

Deduction:$95,000 × 90% = $85,500

Tax savings at 37% rate:$85,500 × 37% = $31,635 saved in taxes.

That’s real cash kept in the business.

Should You Buy or Should Your Company Buy?

We often help clients decide whether the vehicle should be purchased:

• personally,

• by the LLC, or

• by the S corporation.

The “right” choice depends on:

• liability protection

• insurance structure

• employee vs. owner compensation

• auto reimbursement rules

• payroll tax planning

If you’re an S corporation, this decision is especially important.

Final Thoughts

The return of 100% bonus depreciation is one of the most impactful tax provisions in the OBBB for small business owners.

If you’ve been considering purchasing a business vehicle, doing so before December 31 could unlock a significant tax deduction.

While year-end vehicle purchases can create powerful tax benefits, it’s important to remember that good financial decisions should be driven by business need—not just deductions. A tax write-off never justifies buying something you don’t actually need. You’re still spending real money today to save a smaller amount in taxes later. Before pulling the trigger on a vehicle purchase, make sure it aligns with your long-term financial goals, cash flow, and operational needs. The best tax strategies support smart business decisions—not replace them.

At Shifflett & Philips CPA, we help clients make sure the purchase is structured correctly, documented properly, and aligned with their broader tax plan.