Making the Most of your Vehicle Deduction

July 10, 2025 | by Atherton & Associates, LLP

Factors to Consider When Purchasing a Vehicle

July 10, 2025
From the Office of Ashlyn Walker, Tax Associate

Vehicles are an essential business asset for many business owners. The tax implications for these investments will vary based on vehicle type and usage by the business. Whether you are investing in a vehicle that is used or new, gas or electric, it can be beneficial to consider the impact of any tax deductions or credits in your purchasing process.

Business Usage Rate

• If a vehicle is used for personal purposes, then the personal costs cannot be deducted by the business.
• Business usage can be calculated by dividing the business-related miles by the total miles driven in a year.
• If a vehicle is solely used for business purposes, there is no business usage limitation and all related costs may be eligible for deduction.

·        It is in the taxpayer’s best interest to have an organized system in place to track personal and business use of vehicles over the course of the tax year.

Business Standard Mileage Rate

• The business standard mileage rate varies from year to year.
• For 2025, the rate is a 70 cent deduction per business mile driven, which is intended to account for fuel, expenses, and wear and tear over the course of the year.

·        A tax preparer will consider both the business usage rate and the business standard mileage rate to select the most advantageous deduction for clients.

Gross Vehicle Weight Rating (GVWR)

• Gross Vehicle Weight Rating, or GVWR, is the maximum weight a vehicle, including its cargo and passengers can safely carry, as determined by the manufacturer.
• If a truck, van, or SUV’s GVWR is less than 6,000 pounds, the purchase price will be deducted over the course of its useful life (generally five years), with limitations to the yearly deduction.
• If these specs exceed 6,000 pounds, the deduction can speed up and be received earlier in the vehicle’s life, with less annual limitations.

Electric and Hybrid Vehicles

·       Electric and hybrid vehicles may also qualify for an additional tax credit beyond other deductions.

·       Upon purchase, review any documents from the dealership and provide them to your tax preparer so they may determine whether the vehicle qualifies for the credit.

·       The credit may have been received upon purchase or should be received when filing the related tax return.

Action Item
As with any investment, the top priority when purchasing a new vehicle is ensuring it is the right fit for your business needs. Please reach out to your tax advisor for more clarity on how to receive the most tax savings in this process.