Should You Buy That Car Through The Business?
A practical walkthrough of US & Kentucky vehicle tax rules, worked examples, and a calculator to compare personal ownership + mileage reimbursement against business ownership with §179 / bonus depreciation.
1The Rules That Actually Drive The Decision
Luxury Auto Depreciation Caps
For passenger autos under 6,000 lb GVWR, depreciation is capped regardless of price:
- Year 1 (with bonus): ~$20,400
- Year 2: ~$20,000
- Year 3: ~$12,000
- Year 4+: ~$7,500
An $80K sedan and a $50K sedan depreciate at the same capped rate. The premium is not deductible faster.
Heavy Vehicles Escape §280F
Vehicles with Gross Vehicle Weight Rating over 6,000 lbs are exempt from luxury auto caps. This is the "big truck" loophole.
- §179 SUV expensing cap: ~$31,300 (2025)
- 100% bonus depreciation on remaining basis (OBBBA restored)
- Effect: write off a large percentage of a $90K SUV in year one
Common qualifiers: Tahoe, Suburban, Escalade, Sequoia, F-150 (some), Rivian R1S/T, Cybertruck, G-Wagen, large Range Rover.
100% First-Year Deduction
OBBBA (2025) restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025. Stackable with §179. On a heavy SUV, this is the "write off the whole truck" mechanic.
Requires >50% business use for the entire recovery period. Drop below 50% and you recapture prior excess deductions as ordinary income.
How You Deduct Day-to-Day
Standard mileage (2025): $0.70 per business mile. No receipts. Clean.
Actual expenses: gas + insurance + repairs + depreciation × business %. Requires tracking.
Pick standard mileage in year one to keep optionality — you can switch to actual later. Take accelerated depreciation year one and you are locked into actual forever.
- No contemporaneous mileage log = no deduction. "About 80% business" does not survive audit.
- Commuting is never deductible, even in a business-titled vehicle.
- Personal use of a business vehicle is W-2 wages to an S-corp owner. Miss this and it is a common audit finding.
- Trade-in on a business vehicle = fully taxable recapture as ordinary income post-TCJA. No like-kind exchange.
- Commercial auto insurance on a business-titled vehicle typically runs 20-50% more than personal.
2Kentucky-Specific Costs
| Item | Rate / Amount | Notes |
|---|---|---|
| KY Motor Vehicle Usage Tax | 6% | Paid at registration. Added to depreciable basis. |
| KY Annual Ad Valorem Tax | Varies | Jefferson Co. PVA assesses; paid at annual registration renewal. |
| KY Income Tax | 4.0% | Flat — deductions reduce KY tax dollar-for-federal. |
| Louisville Metro OL (combined) | 2.20% | Deductions reduce net profit subject to this. |
| St. Matthews OL | 0.75% | Stacks on top of Louisville for in-city earnings. |
| Total Local Tax on Business Profit | 2.95% | Combined — your effective marginal on the deduction side. |
A vehicle deduction at a St. Matthews small business saves federal + 4% KY + 2.95% local. For a 24% federal bracket owner, that is ~30.95% of every deductible dollar, or ~46.25% at the 37% top bracket.
3Worked Examples
Example A — $45,000 Honda Accord, 70% business use
Personal WinsUnder 6,000 lb GVWR → §280F caps apply. Year 1 depreciation capped at ~$20,400 × 70% = ~$14,280. Over 5 years, business deductions recover maybe $33K of the $45K.
Personal alternative: keep title personal. 15,000 business miles × $0.70 = $10,500/yr reimbursement from business, tax-free to you, fully deductible to the business. Over 5 years: $52,500 in deductions — more than actual-method would produce, with zero audit exposure for personal use.
Plus: no commercial insurance upcharge, no W-2 imputed income, clean accounting. Verdict: buy personal, reimburse mileage.
Example B — $90,000 Chevy Tahoe, 80% business use
Business Wins — BigOver 6,000 lb GVWR → §280F caps do NOT apply. Year 1 plan:
- §179 SUV cap: $31,300
- 100% bonus on remaining $58,700 × 80% = $46,960
- Year 1 total deduction: $31,300 × 80% + $46,960 = ~$72,000
At a combined 30.95% marginal rate, that is ~$22,300 of tax savings in year one alone.
Personal mileage alternative: 15,000 mi × $0.70 × 5 yrs = $52,500 deductions → ~$16,250 savings over five years. The Tahoe beats it in year one.
Verdict: business purchase, §179 + bonus, but maintain a bulletproof mileage log and plan for recapture risk at exit.
Example C — $70,000 Tesla Model S, 60% business use
It DependsUnder 6,000 lb GVWR (Model S is ~4,900 lb) → §280F caps. Year 1 depreciation capped at ~$20,400 × 60% = $12,240 regardless of the $70K price.
5-year business deductions total roughly $48K × 60% = ~$29K of a $70K vehicle deducted. Personal ownership + mileage reimbursement at 12,000 business miles/yr = $8,400/yr × 5 = $42K of deductions.
Personal reimbursement wins the deduction race, plus avoids commercial insurance, personal-use imputed income, and §30D credit timing issues. Verdict: buy personal.
Example D — $95,000 Rivian R1S, 90% business use, S-corp
Business WinsR1S GVWR ~7,800 lbs → heavy. Electric → also eligible for Commercial Clean Vehicle Credit if placed in service before Sept 30, 2025 (OBBBA terminated after that).
Assuming post-termination purchase:
- §179 SUV: $31,300 × 90% = $28,170
- Bonus on remaining: $63,700 × 90% = $57,330
- Year 1 deduction: ~$85,500
- Tax savings at 30.95%: ~$26,450
Verdict: business ownership is strongly indicated, but 90% business use on a family-capable SUV triggers audit scrutiny — document relentlessly.
4Run Your Own Numbers
Compares Business ownership (actual method + §179/bonus) against Personal ownership + mileage reimbursement from the business over a 5-year hold. Assumes S-corp owner with accountable plan, standard mileage rate $0.70/mi, KY residency.