Small business owners can unlock significant tax savings in 2025 by combining two powerful tax breaks: first-year depreciation deductions for heavy vehicles and home office deductions. Here’s how this strategy can reduce your federal and state income tax liability while helping your business thrive.
Step 1: Leverage Depreciation Deductions for Heavy Vehicles
If your business needs an SUV, pickup, or van, 2025 is the year to make that purchase. Vehicles that meet certain weight requirements are eligible for substantial first-year depreciation write-offs.
What Vehicles Qualify?
To take advantage of these deductions, the vehicle must:
- Have a gross vehicle weight rating (GVWR) above 6,000 pounds.
- Be purchased (not leased) and used more than 50% for business purposes.
Popular heavy vehicles include:
- Cadillac Escalade
- Jeep Grand Cherokee
- Chevy Tahoe
- Ford Explorer
- Lincoln Navigator
- Full-size pickups
The GVWR can typically be found on a label inside the driver’s side door.
Tax Benefits for Heavy Vehicles
- Section 179 Deductions
- Businesses can write off most or all of the vehicle’s cost in the first year under Section 179.
- The maximum deduction for tax years beginning in 2024 is $1.25 million.
- SUV Limits
- For heavy SUVs with GVWRs between 6,001 and 14,000 pounds, the 2025 Section 179 deduction is limited to $31,300.
- Bonus Depreciation
- Heavy vehicles placed in service in 2025 are eligible for 40% bonus depreciation.
- This is particularly beneficial for offsetting Section 179 limits.
Step 2: Qualify for Home Office Deductions
Pairing your heavy vehicle purchase with a home office deduction can amplify your tax savings. A home office that qualifies as your principal place of business allows you to count commuting mileage as business mileage.
What Makes a Home Office Qualify?
- Principal Place of Business:
- Perform most income-earning activities at your home office, OR
- Use the home office for administrative and management tasks that aren’t performed elsewhere.
- Exclusive Use Rule:
- The home office space must be used regularly and exclusively for business.
Benefits of a Qualifying Home Office
- Increased Business Mileage: Mileage between your home office and temporary work locations (e.g., client sites) or another regular business location qualifies as deductible business mileage.
- Boost Business Use Percentage: The more business mileage you record, the easier it is to surpass the 50%-business-use test for vehicle depreciation deductions.
The Power of Combining Tax Breaks
By using these two strategies together, small business owners can maximize deductions:
- Heavy Vehicle Depreciation: Write off a significant portion of your vehicle’s cost in the first year.
- Home Office Deductions: Increase deductible mileage and save on additional expenses like utilities and internet.
This combination can result in substantial tax savings, reducing both your federal income tax and self-employment tax liability.
Important Considerations
- Compliance Is Key:
- Keep detailed mileage logs, including trip dates, destinations, and purposes.
- Ensure your home office meets the exclusive use and principal place of business requirements.
- Restrictions for Corporation Employees:
- If you’re employed by your own corporation, you may not be eligible to deduct home office expenses under federal tax rules.
Double the Savings, Double the Benefits
Combining heavy vehicle depreciation with home office deductions is a smart strategy for small business owners in 2025. Take advantage of these opportunities to minimize your tax burden and reinvest in your business.
Contact us today for expert guidance on how to implement this strategy and maximize your tax savings.
