Vehicle Tax Deductions for Contractors: Work Trucks, Vans, and Trailers

The 2026 IRS standard mileage rate is 72.5 cents per business mile — one of several methods, alongside Section 179 and bonus depreciation, contractors use to deduct their work truck or van. For most contractors, that vehicle is the largest asset they own and one of their biggest annual tax deductions. Getting this right can produce $15,000–$40,000+ in deductions in the year of purchase. Getting it wrong means leaving significant money on the table or, worse, taking deductions that don’t hold up in an audit.

Should You Use the Standard Mileage Rate for Your Work Vehicle?

The IRS standard mileage rate for 2026 is 72.5 cents per mile for business use. Track your business miles and multiply.

Who it works for: Contractors who drive moderate distances, use their vehicle part personally, and don’t want the recordkeeping burden of tracking actual vehicle costs.

Who it doesn’t work for: Contractors who use their vehicle almost exclusively for work and own expensive trucks. A $75,000 pickup truck driven 20,000 business miles at 72.5 cents produces a $14,500 deduction — but the actual expense method on the same truck might produce $20,000–$30,000 in the first year through depreciation.

Critical limitation: You must choose the standard mileage rate in the first year the vehicle is placed in service. If you use actual expense in Year 1, you’re locked out of standard mileage for that vehicle for its entire useful life. Get this right the first year.

How Does the Actual Expense Method Work?

Track all vehicle expenses — fuel, insurance, registration, maintenance, repairs, tires, parking — and deduct the business-use percentage. Combine with depreciation on the vehicle’s cost.

Business-use percentage: If you drive 20,000 miles total and 17,000 are business miles, your business-use percentage is 85%. You deduct 85% of actual costs plus 85% of depreciation.

Documentation required: Mileage log for every trip (date, destination, business purpose, miles). The IRS requires contemporaneous records — your memory in February doesn’t qualify. Use a mileage tracking app or keep a log in the vehicle.

What Is Section 179 and How Does Full First-Year Expensing Work?

Section 179 allows you to expense the full purchase price of qualifying business property in the year of purchase, instead of depreciating it over several years.

For work trucks and vans (GVWR > 6,000 lbs): The Section 179 limit is $2,560,000 in 2026, but your deduction is capped at your business’s net income for the year. You cannot create a loss with Section 179.

Practical example: Contractor buys a $65,000 pickup truck (GVWR > 6,000 lbs) with 100% business use, has $120,000 in net income. Section 179 deduction = $65,000 in Year 1, reducing taxable income to $55,000.

The luxury vehicle limitation — what it does and doesn’t apply to: For passenger vehicles, the IRS caps annual depreciation significantly (~$12,400 in Year 1). But this cap applies to “listed property” with GVWR under 6,000 lbs. Most contractor work trucks and cargo vans exceed 6,000 lbs GVWR and are NOT subject to the luxury auto limits.

What to check: The sticker on the driver’s side door jamb shows GVWR. If it says > 6,000 lbs, you have a heavy vehicle that qualifies for full Section 179 expensing.

What Is Bonus Depreciation and How Does It Work With Section 179?

Bonus depreciation allows you to immediately deduct a percentage of qualifying property cost in Year 1. For 2026, bonus depreciation is 100% — OBBBA made full expensing permanent for qualifying property placed in service after January 19, 2025, reversing the phase-down that had previously been scheduled to reach 20% by 2026 and 0% after.

Unlike Section 179, bonus depreciation can create a loss. If you have a large truck purchase and modest net income, bonus depreciation can push your business into a tax loss that you may be able to carry back or forward.

Combining Section 179 and bonus depreciation: You can use Section 179 first (up to your net income cap), then bonus depreciation on the remainder. This is the standard approach to maximize Year 1 deductions.

Are Equipment Trailers Fully Deductible?

Equipment trailers used to haul tools and materials to job sites are fully deductible business property. They are not subject to the “listed property” rules that apply to vehicles — so you can deduct 100% via Section 179 or bonus depreciation without the 6,000 lb threshold question.

How Does Personal Use Affect Your Vehicle Deduction?

Vehicle deductions are one of the most-audited items on contractor returns. The IRS knows that work trucks often have personal use mixed in. Your deduction must be proportional to business use.

True 100% business use vehicles: No personal commuting, no family errands, often stored at the business address. These qualify for full deduction.

Mixed-use vehicles: If you drive the truck to pick up your kids or run personal errands, you have personal use. Track it honestly — the IRS doesn’t take kindly to 100% business use claims on a vehicle that’s the family hauler.

Commuting is never deductible: Driving from your home to your first job site of the day is commuting — not business mileage. If your business has an office (including a qualifying home office), driving from the office to a job site is business mileage.

How Does Combining a Home Office With Your Vehicle Increase Your Deduction?

If you have a qualifying home office, your home becomes your “principal place of business.” This means driving from home to your first job site is business mileage (not commuting), and driving from the last job site back home is also business mileage.

For contractors who run out of a home office and drive to multiple job sites per day, this combination can meaningfully increase deductible mileage. The home office must meet the exclusive use test and the principal place of business test.

Home office deduction for contractors — how to qualify and what documentation is required.

Contractor tax deductions checklist — full list of deductions beyond vehicles.

This article is educational. Reflects 2024 tax law. Consult a licensed CPA for advice specific to your situation.