Section 179 and Bonus Depreciation for Truckers

Section 179: Write Off Your Truck in Year One

Section 179 of the Internal Revenue Code allows business owners to deduct the full purchase price of qualifying equipment in the year it is placed in service, rather than depreciating it over multiple years. For owner-operators, this means you can potentially deduct the entire cost of your truck, trailer, and other business equipment in the tax year you buy it.

The 2026 Section 179 deduction limit is $1,220,000, with a phase-out threshold beginning at $3,050,000 in total equipment purchases (these limits adjust annually for inflation per IRS Revenue Procedure). For a single-truck owner-operator buying one tractor and one trailer, you are nowhere near the phase-out — a $160,000 truck and $45,000 trailer totaling $205,000 is well within the limit.

Qualifying equipment includes your tractor, trailer (dry van, reefer, flatbed, etc.), auxiliary power unit (APU), in-cab equipment (ELD hardware, GPS units, inverters, refrigerators, microwave), computers and tablets used for business, and office furniture if you have a home office. The equipment must be used more than 50% for business — for dedicated owner-operators, business use is typically 95–100%.

Used equipment qualifies for Section 179. This is a critical point that many operators miss. A used 2020 Freightliner Cascadia purchased for $65,000 qualifies for the full $65,000 Section 179 deduction just as a brand-new $180,000 Kenworth W990 would. The equipment only needs to be new to your business, not new from the manufacturer.

Section 179 is elected on IRS Form 4562 (Depreciation and Amortization), which is attached to your Schedule C. Your tax software or CPA handles this form, but you need to provide the purchase price, date placed in service, and business-use percentage for each asset. Keep your purchase agreement, bill of sale, and financing documents — these are your substantiation if the IRS questions the deduction.

The Income Limitation and How It Affects You

Section 179 has one major limitation that catches many truckers off guard: the deduction cannot exceed your net taxable business income for the year. If your Schedule C shows a net profit of $60,000 and you bought a $150,000 truck, you can only claim $60,000 in Section 179 for that year — not the full $150,000.

The remaining $90,000 does not disappear. You have two options: carry the unused Section 179 amount forward to future tax years (where it remains subject to the income limitation each year), or recover it through regular MACRS depreciation over the remaining recovery period. Most CPAs recommend a combination approach — claim the maximum Section 179 your income allows, then use MACRS depreciation for the balance.

This income limitation is calculated on your total business income, not just trucking income. If you have a spouse who earns income from a separate business, or if you have other Schedule C activities, those income sources can support a larger Section 179 deduction. On a joint return, the combined net business income of both spouses counts toward the Section 179 limitation.

Here is a real-world planning scenario: Mark buys a $140,000 Peterbilt 579 in March 2026. His net Schedule C income for 2026 is projected at $85,000. He claims $85,000 in Section 179 and depreciates the remaining $55,000 using regular MACRS over the 5-year recovery period (20% in year one under MACRS = $11,000 additional depreciation). His total first-year write-off is $96,000 — more than 68% of the truck's cost.

First-year owner-operators face a particular challenge. If you buy your truck in October and only operate for three months, your net business income for that partial year might be $15,000–$25,000. Your Section 179 deduction is limited to that amount. This is why timing your truck purchase matters — if possible, start operating early in the tax year to maximize your income and thus your Section 179 capacity. Use /tools/cost-per-mile-calculator to project your annual net income.

Bonus Depreciation in 2026: The Phase-Down

Bonus depreciation is an alternative (or supplement) to Section 179. Under the Tax Cuts and Jobs Act of 2017, 100% bonus depreciation was available from 2018 through 2022, allowing businesses to write off the entire cost of qualifying assets in year one — similar to Section 179 but without the income limitation.

However, bonus depreciation is phasing down on a fixed schedule: 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. For the 2026 tax year, you can only claim 20% bonus depreciation on the depreciable basis of qualifying equipment. On a $150,000 truck, 20% bonus depreciation gives you a $30,000 first-year deduction — compared to up to $150,000 under Section 179 (if your income supports it).

This means Section 179 is now the primary first-year deduction tool for most owner-operators. Bonus depreciation at 20% is a secondary benefit applied to any remaining depreciable basis after Section 179. Here is how they work together:

Sarah buys a $120,000 International LT in 2026. Her net Schedule C income is $75,000. She claims $75,000 in Section 179 (limited by income). Remaining basis: $120,000 - $75,000 = $45,000. She applies 20% bonus depreciation to the remaining basis: $45,000 x 20% = $9,000. Remaining basis after Section 179 and bonus: $45,000 - $9,000 = $36,000. This $36,000 is depreciated under regular MACRS over the remaining recovery period. Sarah's total first-year deduction: $75,000 + $9,000 + $7,200 (MACRS year-one on $36,000 at 20%) = $91,200.

Beyond 2026, bonus depreciation drops to 0% unless Congress extends or modifies the provision. Legislative changes are always possible — the trucking industry lobby (ATA, OOIDA) has pushed for permanent 100% expensing. Monitor IRS announcements and consult your CPA for the latest rules. See /guides/tax-deductions-owner-operator for how depreciation fits into your overall deduction strategy.

Regular MACRS Depreciation Explained

If you do not elect Section 179 or bonus depreciation — or if you have remaining basis after those deductions — your truck and equipment are depreciated under the Modified Accelerated Cost Recovery System (MACRS). Understanding MACRS matters because most owner-operators use a combination of Section 179, bonus depreciation, and MACRS to recover the full cost of their equipment.

Trucks, tractors, and trailers are classified as 5-year property under MACRS (IRS Publication 946, Table B-1). The standard MACRS percentages for 5-year property using the 200% declining balance method are: Year 1: 20%, Year 2: 32%, Year 3: 19.2%, Year 4: 11.52%, Year 5: 11.52%, Year 6: 5.76%. Note that 5-year property actually takes 6 calendar years to fully depreciate due to the half-year convention.

The half-year convention assumes you placed the asset in service at the midpoint of the year, regardless of the actual date. A truck purchased in January and a truck purchased in November both get the same 20% first-year MACRS deduction. However, if you place more than 40% of your total annual asset purchases in service during the last quarter of the year (October–December), the IRS forces you to use the mid-quarter convention instead, which gives a much smaller first-year deduction for Q4 purchases. This is another reason to buy your truck early in the year if possible.

Alternative Depreciation System (ADS) is required in certain situations — most commonly if the business use of the asset drops to 50% or below. Under ADS, trucks use a longer recovery period and straight-line depreciation, resulting in smaller annual deductions. As long as your truck is used more than 50% for business (which it almost certainly is as an owner-operator), you use the standard MACRS method.

When you sell or trade in your truck, you must account for depreciation recapture. If you depreciated $100,000 on a truck and sell it for $40,000, the gain up to the amount of depreciation claimed is taxed as ordinary income (Section 1245 recapture), not capital gains. This recapture tax is a future liability you should plan for when selling equipment.

Tax Planning Strategies for Equipment Purchases

Smart timing and structuring of equipment purchases can save you thousands in taxes. Here are strategies used by financially sophisticated owner-operators.

Time your purchase to maximize first-year income. Section 179 is limited by your net business income. If you buy your truck in January and operate all year, you have 12 months of revenue to support a larger Section 179 deduction. Buying in October gives you only 3 months of income, potentially stranding a large portion of the purchase price in carryforward or slower MACRS depreciation.

Consider the tax bracket effect. If your net income before the equipment purchase puts you in the 24% bracket ($100,526–$191,950 for single filers in 2026) and Section 179 drops you to the 12% bracket ($11,601–$47,150), each dollar of Section 179 in the 24% bracket saves $0.24 in federal income tax plus approximately $0.153 in self-employment tax — a total of $0.393 per dollar. That makes a $100,000 Section 179 deduction worth roughly $39,300 in tax savings. Use your projected income to estimate the bracket effect before committing to a purchase.

Do not buy a truck just for the tax deduction. This is the most common financial mistake in trucking. A $150,000 truck that saves you $45,000 in taxes still costs you $105,000 net. You are better off earning $150,000 and paying $45,000 in taxes (keeping $105,000) than spending $150,000 on a truck to avoid the taxes (keeping $0 plus a depreciating asset). Buy equipment when you need it for business reasons, then maximize the tax benefits — not the other way around.

If you are considering a used truck versus a new truck, the tax treatment is identical — both qualify for Section 179 and bonus depreciation. The financial advantage of a used truck is the lower purchase price, less depreciation in resale value, and lower insurance premiums. A 3-year-old truck at $65,000 with a $65,000 Section 179 deduction may be a better financial decision than a new truck at $160,000 with the same first-year write-off.

Lease versus buy has different tax implications. Operating leases are fully deductible as a business expense on Schedule C (Line 20b, Rent — vehicles, machinery, equipment), with no need to calculate depreciation. Capital leases (lease-purchase agreements) are treated as purchases for tax purposes — you depreciate the asset and deduct the interest. Understand which type of lease you have, because misclassifying a capital lease as an operating lease creates tax problems. See /guides/tax-deductions-owner-operator for where each deduction type goes on your Schedule C.

Real-World Scenarios and Tax Savings

Let us walk through three common owner-operator scenarios to show how Section 179, bonus depreciation, and MACRS interact in practice.

Scenario 1 — New operator, financed truck: David gets his authority in February 2026 and finances a 2023 Kenworth T680 for $95,000 with $15,000 down. His net Schedule C income for 2026 is $55,000. He elects $55,000 in Section 179. Remaining basis: $40,000. Bonus depreciation (20%): $8,000. MACRS on remaining $32,000 (20%): $6,400. Total first-year depreciation: $69,400. This nearly eliminates his taxable self-employment income, saving roughly $15,000–$18,000 in federal income and self-employment taxes combined.

Scenario 2 — Established operator, new truck upgrade: Lisa has been operating for 4 years and trades her 2020 Cascadia (fully depreciated, trade-in value $35,000) for a new 2026 Peterbilt 579 at $175,000 ($140,000 after trade). Her net Schedule C income is $110,000. She claims $110,000 in Section 179. Remaining basis: $30,000. Bonus depreciation (20%): $6,000. MACRS on remaining $24,000 (20%): $4,800. Total first-year deduction: $120,800. She also must report the $35,000 trade-in as depreciation recapture (ordinary income) since the old truck was fully depreciated. Net tax benefit is still substantial after recapture.

Scenario 3 — Cash purchase, lower income year: Mike buys a 2019 Freightliner Cascadia outright for $48,000 during a slow freight year. His net Schedule C income is only $38,000. Section 179 is limited to $38,000. Remaining basis: $10,000. Bonus depreciation (20%): $2,000. MACRS on remaining $8,000 (20%): $1,600. Total first-year deduction: $41,600. The remaining $6,400 basis continues depreciating in years 2–6. Mike's total tax savings in year one: approximately $12,000–$14,000.

In all three scenarios, the key variables are purchase price, net business income (which caps Section 179), and the current bonus depreciation percentage. Run your own numbers with projected income before buying — your CPA can model different purchase amounts and timing to optimize your tax position. Check /earnings/owner-operator and /earnings/dry-van for income benchmarks by equipment type.