You can significantly reduce your business vehicle costs with Section 179 tax deductions. This IRS code allows businesses to deduct the full purchase price of qualifying vehicles in the year they are placed in service, rather than depreciating them over time. At Mercedes-Benz of Fort Mitchell, we can help you explore how this deduction applies to our new and pre-owned Mercedes-Benz inventory.

• Section 179 of the IRS tax code may allow qualifying businesses to deduct certain equipment and/or software costs (up to applicable annual limits) for the year the property is placed in service.
• Years ago, Section 179 was sometimes referred to as an “SUV Tax Loophole” because businesses used it for qualifying vehicle purchases. Today, the eligibility and limits for business vehicles under Section 179 are subject to current IRS rules (see “Vehicles & Section 179 for current limits on business vehicles.”).
• Section 179 can still be beneficial for eligible small businesses, subject to IRS limits and eligibility requirements. Many businesses also consider other depreciation options (such as Bonus Depreciation) depending on their situation and the type of property.

• When your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example). Now, while it's true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it.
• And that's exactly what Section 179 does - it allows your business to write off the entire purchase price of qualifying equipment for the current tax year. This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2024 tax return (up to $1,220,000).

• Section 179 does come with limits - there are caps to the total amount written off ($2,560,000 for 2026), and limits to the total amount of the equipment purchased ($4,090,000 in 2026). The deduction begins to phase out on a dollar-for-dollar basis after this limit is reached by a given business (thus, the entire deduction goes away once $6,650,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.

• All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2026 should qualify for the Section 179 Deduction (assuming they spend less than $6,650,000).
• Most tangible goods used by American businesses, including "off-the-shelf" software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction. For basic guidelines on what property is covered under the Section 179 tax code, please refer to the list of Section 179 Qualifying Equipment. Also, to qualify for the Section 179 Deduction, the equipment and/or software purchased or financed must be placed into service between January 1, 2026 and December 31, 2026.
• For 2026, $2,560,000 of assets can be expensed; that amount phases out dollar for dollar when $4,090,000 of qualified assets are placed in service.

Bonus depreciation is available in some tax years and not in others. Availability and percentages vary by year, so be sure to confirm the current IRS guidance before planning.

The key difference is that Section 179 can allow deductions for qualifying new and used equipment (as long as the used equipment is “new to you”), while bonus depreciation eligibility is determined by the rules in the applicable tax law year, including whether used equipment is included.

Bonus depreciation may be useful for businesses that plan significant capital equipment purchases, especially when they exceed the Section 179 spending limit for the year. Businesses with a net loss may still be able to utilize deductions subject to the applicable limitations and carryforward rules.

When applying these provisions, Section 179 is generally taken first, followed by bonus depreciation—though specific ordering and limitations can depend on the business’s taxable income and the year’s rules.

The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.