Understanding Vehicle Depreciation
When you purchase a vehicle for your NEMT business, you can't deduct the entire cost in year one (usually). Instead, you "depreciate" the cost over several years. But there are strategies to accelerate these deductions.
Depreciation Methods Overview
1. Section 179 Deduction Deduct the full cost in year one (with limits)
2. Bonus Depreciation Deduct a percentage of cost in year one
3. MACRS Depreciation Spread deductions over 5 years
4. Standard Mileage Rate Includes depreciation component (simplest method)
Section 179 Explained
Section 179 allows you to deduct the full purchase price of qualifying equipment in the year of purchase.
2026 Limits: - Maximum deduction: $1,220,000 - Phase-out threshold: $3,050,000 - Must have taxable income to use
Vehicle-Specific Limits:
Vehicle Type Section 179 Limit | |-------------|------------------| Cars & light trucks (<6,000 lbs) $12,200 | SUVs (6,000-14,000 lbs) $30,500 | Heavy vehicles (>14,000 lbs) Full cost | Wheelchair vans (usually >6,000 lbs) Often full cost |
Why NEMT Operators Win
Most wheelchair-accessible vans and modified vehicles exceed 6,000 lbs GVWR, qualifying for unlimited Section 179 deduction.
Example: - Purchase price: $75,000 wheelchair van - GVWR: 8,500 lbs - Section 179 deduction: $75,000 (full cost!)
Bonus Depreciation
If you can't use Section 179 (no taxable income), bonus depreciation is your backup.
2026 Rate: 40%
You can deduct 40% of the vehicle cost in year one, regardless of income.
Example: - Purchase price: $75,000 - Bonus depreciation: $75,000 × 40% = $30,000 - Remaining basis: $45,000 (depreciate over 5 years)
MACRS Depreciation
The default method if you don't use Section 179 or bonus depreciation.
5-Year MACRS Schedule:
Year Percentage | |------|-----------| 1 20% | 2 32% | 3 19.2% | 4 11.52% | 5 11.52% | 6 5.76% |
Example ($75,000 vehicle): - Year 1: $15,000 - Year 2: $24,000 - Year 3: $14,400 - Year 4: $8,640 - Year 5: $8,640 - Year 6: $4,320
Standard Mileage vs. Actual Expenses
Standard Mileage Rate (2026: 70¢/mile)
Includes: - Depreciation - Gas - Insurance - Maintenance - Registration
Best for: - Simpler record-keeping - Vehicles with high mileage - Older vehicles
Actual Expenses
Includes: - Depreciation (your choice of method) - Actual gas costs - Actual insurance - Actual maintenance - Registration
Best for: - Expensive vehicles - Low-mileage vehicles - Maximizing deductions
Making the Choice
Use Section 179 When: - You have taxable income - Vehicle qualifies (check GVWR) - You want maximum year-one deduction - Cash flow allows full purchase
Use Bonus Depreciation When: - No taxable income this year - Want partial acceleration - Section 179 limits exceeded
Use MACRS When: - Want to spread deductions - Planning for future income - Already used Section 179 limit
Use Standard Mileage When: - Simplicity is priority - Vehicle is older/cheaper - High annual mileage
Special Considerations for NEMT
Wheelchair Lift Modifications
The cost of wheelchair lifts and accessibility modifications can be: - Added to vehicle basis (depreciated together) - Deducted separately as equipment - Section 179'd in year of installation
Leased Vehicles
If you lease rather than buy: - No depreciation deduction - Lease payments are deductible - May need to include "inclusion amount"
Used Vehicles
Section 179 and bonus depreciation apply to used vehicles too—they don't have to be new!
Record-Keeping Requirements
Document for Each Vehicle: - Purchase date and price - GVWR (from door sticker) - Depreciation method chosen - Annual depreciation taken - Business use percentage - Disposition date and amount
FleetBooks Depreciation Tracking
FleetBooks automatically: - Records vehicle purchases - Tracks GVWR for Section 179 eligibility - Calculates depreciation by method - Generates tax-ready reports - Maintains audit documentation
Action Items
1. Check GVWR on all vehicles 2. Calculate taxable income projection 3. Compare Section 179 vs. standard mileage 4. Document your method choice 5. Keep purchase records for 7+ years
Pro Tip: Consult with a tax professional before making large vehicle purchases. The right depreciation strategy can save thousands in taxes.