Deducting Expenses for Business Vehicles

allowance, the actual expense method may be more advantageous. When making this choice, it's smart to estimate the amount of your vehicle deductions for the current year and future years, and make the choice based on your estimated expenses for the entire time you expect to keep the vehicle -- not just for the first year.

One caution before taking that full first-year write-off for that SUV over 6,000 pounds -- if the business usage of the vehicle ever drops to 50% or less in any year of its use, the "excess depreciation" or extra first-year write-off is subject to what the IRS calls "recapture." That means the excess depreciation taken must be reported as ordinary income subject to tax in the year the business use percentage fell to 50% or less. Be sure your business use percentage will stay above 50% before taking the extra first-year write-offs.