How to Save Tax by Converting Your Personal Vehicle into a Business Asset

A Simple Example of How This Saves You Money

Let’s say you bought a car in 2022 for $100,000. Today, it’s worth $60,000. You decide to start using it 70 percent for business. Because of that change, you can now claim a $42,000 deduction (that’s 70 percent of $60,000). You already paid for the car years ago, but by converting it to business use, you unlock a brand-new deduction for 2025. It’s a powerful way to turn an old personal expense into a fresh tax write-off.

Why This Strategy Works

When you convert your personal car into business use, the IRS treats it as if you just placed it into service for your business. That means you can start depreciating it and claiming tax deductions. The starting value for depreciation is the lower of two numbers: the fair market value when you start using it for business or what you originally paid for it (including any upgrades). In this case, you’d use $60,000 because it’s lower than what you paid.

How Bonus Depreciation Creates Big Deductions

Normally, you can’t use Section 179 expensing on assets converted from personal to business use. But you can use bonus depreciation, which lets you deduct a large portion—or even all—of the car’s value in the first year. The best part is that this happens automatically unless you opt out on your tax return. In other words, if you do nothing, you get the tax break.

Which Vehicles Qualify for 100 Percent Bonus Depreciation

If your car, SUV, pickup, or van has a manufacturer’s gross vehicle weight rating (GVWR) above 6,000 pounds, you can generally deduct up to 100 percent of its business-use value right away. For example, if your SUV is worth $60,000, weighs 6,200 pounds, and you use it 70 percent for business, you could deduct $42,000 this year.

Lighter vehicles under 6,000 pounds qualify for smaller deductions, with annual limits that spread out the write-off over several years.

What Happens When You Sell the Vehicle

If you later sell the car, the tax rules depend on whether you have a gain or a loss:

• For a loss, use your adjusted (reduced) basis, which is usually the fair market value at conversion minus depreciation.

• For a gain, use your original purchase price minus depreciation. This usually gives you a higher basis and lowers your taxable gain.

For most vehicles, depreciation lowers your basis, but classic or collectible cars might actually appreciate, so the details can matter.

The Bottom Line

Most personal assets aren’t helpful for tax purposes. You pay tax on any gain and can’t deduct losses. But when you convert a personal car to business use, you flip the rules—you create a deduction without spending new money. Thanks to the One Big Beautiful Bill Act (OBBBA) restoring 100 percent bonus depreciation, this move can mean thousands of dollars in tax savings.

If you own a car that’s worth around $100,000, you could be looking at a deduction worth tens of thousands of dollars in 2025 simply by putting it to business use.