Partial Business Use Vehicles – What Are the Rules?

By | June 6, 2024

Let’s talk about partial business-use vehicles for a moment or three. Because we get asked about this a lot. 

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Most of the questions are tax-related, and we can’t give official tax advice. But there are tax deductions for partial business-use vehicles, and most of them follow the same rules, which I’ll outline here.

The big rule is how much “business use” the vehicle will be subject to. And the threshold for most instances is a minimum of 50%.

This means the vehicle must be used for business at least half the time for it to be considered a partial business-use vehicle in most cases.  

So what is business use exactly? It’s when the vehicle is used for business purposes. In cases of pickup trucks and SUV’s, it’s pretty clear – jobsite use, hauling materials, going to and from jobs to quote, check on the crew’s progress, etc. However, it is NOT bringing your kids to Little League, even if your company did sponsor an outfield wall sign (and good for you in doing that!)  

It gets a little murkier when it comes to larger SUV’s and even passenger vehicles. The same 50% rule applies, but in many cases, business use is a little ambiguous. Is picking up business supplies as well as household groceries business use? That’s for the IRS to answer, not me. But I will say that’s probably not a fun conversation at the audit.

One thing that’s very clear though: a typical commute is NOT business use. Even if you own a company, the time commuting from your home to the physical office is not business use. 

Lastly, size does matter. Nearly all 50% partial business-use vehicles are eligible for some type of deduction, but the larger ones get the bigger deductions. 

Ok, that’s about it on the rules for partial business-use vehicles. I hope it helps, and that the biggest takeaway  is “ask your tax professional”. 

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