When you invest in equipment, vehicles, or other business assets, depreciation can be one of the most valuable tax tools available. But with different rules for Section 179, bonus depreciation, and vehicle limitations, it’s easy to miss out on deductions—or take the wrong ones.

Here’s a clear breakdown of what business owners need to know for 2025 planning.

 

What Is Depreciation?

Depreciation allows businesses to deduct the cost of qualifying assets over time, rather than all at once. This applies to items like equipment, machinery, furniture, and certain vehicles used for business.

Depending on your situation, you may be able to:

• Spread deductions over multiple years, or
• Accelerate deductions to reduce your tax bill sooner

 

Section 179: Immediate Expensing for Business Assets

Section 179 allows eligible businesses to deduct the full cost of qualifying property in the year it’s placed in service—rather than depreciating it over several years.

For property placed in service after December 31, 2017, the rules are:

• Maximum Section 179 deduction: $1,000,000
• Phase-out threshold: $2,500,000

This means:

• Once total qualifying purchases exceed $2.5 million, the Section 179 deduction begins to phase out dollar-for-dollar.
• These limits are adjusted annually for inflation, so planning timing and purchase amounts matters.

 

Vehicle Depreciation & “Luxury Auto” Limits (2025)

Vehicles come with additional IRS restrictions—especially passenger vehicles.

For vehicles placed in service in 2025:

• Luxury auto limit:
• Maximum first-year depreciation of $20,200, including bonus depreciation

This cap applies to most passenger vehicles and limits how much of the purchase price can be written off in year one.

 

SUVs, Vans, and Trucks: Special Section 179 Rules

Heavier vehicles may qualify for larger deductions - but there are still limits.

For SUVs, vans, and certain trucks:

• Section 179 deduction cap: $31,300 for 2025
• $32,000 for 2026
• These limits apply before considering bonus depreciation

This means some additional depreciation may still be available beyond the Section 179 cap, depending on your situation.

 

Why Planning Matters

Choosing the right depreciation strategy isn’t just about buying equipment—it’s about:

• Cash flow planning
• Timing income and deductions
• Avoiding IRS limitations
• Coordinating depreciation with your overall tax strategy

The “best” option depends on your business type, growth plans, and taxable income.

 

How We Help

At Holden Moss Knott CPAs, we don’t just record asset purchases—we help you:

• Decide when to buy
• Choose the most tax-efficient depreciation method
• Maximize deductions while staying compliant
• Align purchases with long-term business goals

 

Thinking about purchasing equipment or a vehicle this year?
Let’s review your options before you buy so there are no surprises at tax time. Contact us to schedule a planning conversation.

 

This content is for general informational purposes only and is not intended as tax advice. Tax rules vary based on individual circumstances.