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Startup Vehicles: Buy or Lease, Deductions and Rules

Guide · Last reviewed October 20, 2026 · Legal and tax review: pending

A new company often needs a vehicle before it needs an office. The choices you make in the first year, who owns it, whether to buy or lease, and which method to use, can lock in your tax result. Here is the short version for 2026.

The 2026 numbers in brief

What	2026
Business mileage rate	72.5 cents a mile for January to June 2026 and 76 cents from July 1 (IRS Notice 2026-10 and the July 2026 increase)
First-year depreciation cap, car of 6,000 pounds or less	$20,300 with bonus depreciation, $12,300 without (IRS Rev. Proc. 2026-15). The cap is multiplied by your business-use percentage.
Section 179 cap for most SUVs over 6,000 pounds	$32,000 (IRS Rev. Proc. 2025-32). 100% bonus depreciation is available for qualifying property acquired after January 19, 2025.
Lease inclusion amount applies if the vehicle is worth more than	$62,000 on the first day of a lease that starts in 2026 (IRS Rev. Proc. 2026-15)
Business use needed for bonus depreciation and Section 179	More than 50%

Buy or lease at a glance

Buy. You deduct depreciation on the business share of the cost. A car of 6,000 pounds or less has yearly dollar caps. A heavier vehicle can often be written off much faster, with bonus depreciation or Section 179, if you use it more than 50% for business.
Lease. You deduct the business share of the lease payments. If the vehicle is worth more than $62,000 at the start of a 2026 lease, a small “inclusion amount” reduces the deduction.
Mileage rate or actual costs. The mileage rate is simple, but the first-year choice can lock you in: once you use accelerated depreciation on a car, you cannot use the mileage rate on it. On a lease, the mileage rate must be used for the whole lease.
Selling. The part of a gain that comes from depreciation you took is taxed as ordinary income.

Business use and records

Only the business share counts. Driving between home and your regular workplace is commuting and is never deductible.
Keep a log: date, miles, destination and business purpose for each business trip, plus the total miles for the year. Estimates are not allowed.
If business use drops to 50% or less in a later year, part of an earlier accelerated deduction is added back to income.
The federal electric-vehicle credits ended for vehicles acquired after September 30, 2025.

For founders and early-stage companies

Decide early whether the company or a founder owns the vehicle, and write it down. Start the mileage log on the first day: it cannot be rebuilt later.
If the company reimburses a founder's business mileage, do it under an accountable plan, so the reimbursement is not taxable wages.
Section 179 is limited to the business's taxable income for the year, and any disallowed amount carries forward. Bonus depreciation does not have that income limit, but it can create a loss, so plan it with the company's expected income.
Do not count on an electric-vehicle credit in a budget or funding model: the federal credits ended for vehicles acquired after September 30, 2025.

Read the full guide, with every table and worked examples, on SmallTax.com: Business vehicle tax guide.

Official sources

This article is general education, not tax, legal or investment advice. Mileage rates, caps and limits change; the figures above are for 2026 and were checked against the IRS sources listed on October 20, 2026. Verify current figures with the IRS or a qualified tax professional before acting.