OBBBA: Convert Personal Vehicle to Business, Deduct Up to 100%

Do you have a personal vehicle?

Thanks to the One Big Beautiful Bill Act, you may be eligible for a valuable “no new cash outlay” tax deduction beginning in 2025.

How OBBBA Changes Vehicle Deductions

Here’s how it works: If you convert a personal-use vehicle to business use, the law treats it as placed in service on the conversion date. Thanks to OBBBA’s reinstatement of 100 percent bonus depreciation, you may deduct up to 100 percent of the vehicle’s fair market value—as long as you don’t opt out of bonus depreciation.

For example, if your converted vehicle is worth $31,000 and you use it 70 percent for business, you could deduct $21,700. This would apply on your 2025 return.

Which Vehicles Qualify for 100% Deduction

Heavy SUVs, pickups, and vans with a gross vehicle weight rating (GVWR) over 6,000 pounds qualify for full bonus depreciation. Smaller vehicles are subject to “luxury auto” limits. But even those allow up to $20,200 in first-year deductions.

A few rules to know:

• First, you must use the lower of your vehicle’s fair market value or adjusted basis at the time of conversion to business use.
• Section 179 expensing is not allowed for converted assets, but bonus depreciation is automatically applied unless you actively opt out.
• Similarly, all assets in the same depreciation class are treated the same for bonus depreciation. You’re in or out for the entire group.

If you later sell the vehicle, your basis for calculating gains or losses changes depending on whether it’s a gain or a loss.

This is a powerful way to deduct the cost of an existing asset without spending new money.

How We Can Help

Sterling Tax and Accounting is here to help your business with tax planning! Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket. If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.

Learn how to proactively save on taxes by scheduling a call with our tax planning specialists.

Our Services

Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes.

Welcome to the Sterling Standard of business! Want to learn more? Schedule a meeting with our tax planning team here:
https://www.sterling.cpa/contact-us/