Maximizing Tax Savings: Combining Heavy Vehicles and Home Offices

In 2025, both new and used "heavy" SUVs, pickups, and vans can offer significant first-year depreciation write-offs. To qualify, you must use the vehicle more than 50% for business purposes. If your business usage falls between 51% and 99%, you can deduct that percentage of the cost in the first year. This deduction can reduce both your federal income tax bill and, if applicable, your self-employment tax bill. You might also qualify for a state income tax deduction.

Setting up a home office this year can further enhance your tax savings. Here's how you can benefit from combining these two tax breaks.

Purchase a Heavy Vehicle

The generous first-year depreciation deal applies only to SUVs, pickups, or vans with a manufacturer's gross vehicle weight rating (GVWR) above 6,000 pounds that are purchased (not leased). Lighter vehicles are subject to smaller depreciation limits, up to $20,400 in 2024. (The 2025 amount is yet to be announced.)

There are many attractive vehicles with GVWRs above the 6,000-pound threshold, such as the Cadillac Escalade, Jeep Grand Cherokee, Chevy Tahoe, Ford Explorer, Lincoln Navigator, and various full-size pickups. You can usually find the GVWR on a label on the inside edge of the driver's side door.

Utilize Generous Depreciation Deductions

Favorable depreciation rules apply to heavy SUVs, pickups, and vans used over 50% for business, as they are classified as transportation equipment for federal income tax purposes. Here are three key factors to consider:

1. First-Year Section 179 Deductions: Many businesses can write off most or all of the business-use portion of a heavy vehicle's cost in the first year under the Section 179 deduction privilege. The maximum Section 179 deduction for tax years beginning in 2024 is $1.25 million.
2. Limited Section 179 Deductions for Heavy SUVs: There is a limit on Section 179 deductions for heavy SUVs with GVWRs between 6,001 and 14,000 pounds. For tax years beginning in 2025, the limit is $31,300.
3. First-Year Bonus Depreciation: For heavy vehicles placed in service in 2025, the first-year bonus depreciation percentage is currently 40%, but future legislation may allow a larger write-off. There are several limitations on Section 179 deductions, but no limits on 40% bonus depreciation. Therefore, bonus depreciation can help offset the impact of Section 179 limitations, if applicable.

Qualify for Home Office Deductions

To benefit from the favorable first-year depreciation rules, you must use your heavy SUV, pickup, or van over 50% for business. You are more likely to pass the over-50% test if you have a home office that qualifies as your principal place of business. This way, all commuting mileage from your home office to temporary work locations, such as client sites, is considered business mileage. The same applies to mileage between your home office and any other regular place of business, such as another office you maintain.

When your home office qualifies as a principal place of business, you can easily accumulate plenty of business miles, making it easier to pass the over-50%-business-use test for your heavy vehicle.

How to Make Your Home Office Your Principal Place of Business

There are two ways to qualify your home office as your principal place of business:

1. Conduct most of your income-earning activities there.
2. Conduct administrative and management tasks there, without making substantial use of any other fixed location for these tasks.

You must use the home office space regularly and exclusively for business throughout the year. Additionally, if you are employed by your own corporation (as opposed to being self-employed), you cannot deduct home office expenses under current federal income tax rules.

Double Tax Break

You can potentially claim generous first-year depreciation deductions for heavy business vehicles and also claim home office deductions. This combination can result in significant tax savings. Contact us if you have questions or want more information about this strategy.