Bonus depreciation and Section 179 are the two IRS provisions that let you front-load the tax deduction on a truck purchase into the year you buy it. They work differently and they interact, so understanding both is worth a few minutes of your time before you structure the deal. Financing does not eliminate either benefit. You borrow the money, own the truck, and still take the deduction. The truck earns and the tax bill drops in the same year.
The conversation about Section 179 often gets more attention, but bonus depreciation applies more broadly in some cases and has its own set of rules worth knowing. For dump truck buyers with high taxable income in a good year, layering both provisions on the same purchase can be a legitimate tax strategy worth running by your CPA.
Bonus Depreciation Explained Without the Tax Code Language
Under standard depreciation rules, a truck's cost is deducted over its useful life, typically five years under IRS MACRS schedules for most commercial vehicles. Bonus depreciation (also called first-year expensing or the special depreciation allowance) lets you deduct a large percentage of the truck's cost in year one instead of spreading it out. The percentage has changed over time as tax law has been updated.
After the Tax Cuts and Jobs Act of 2017, bonus depreciation was set at 100% for qualifying property placed in service after September 27, 2017. That 100% rate began phasing down starting in 2023, decreasing by 20 percentage points per year. What this means in practical terms is that the benefit is still real but the exact percentage depends on the year you buy the truck. Your accountant can tell you the current applicable rate for your tax year.
Unlike Section 179, bonus depreciation does not have the business income limitation. You can use bonus depreciation to create a net operating loss (NOL) on the business, which can then be carried forward to offset future income. For an operator with fluctuating year-to-year income, this is the key difference between the two provisions.
New and Used Trucks Under Bonus Depreciation
The Tax Cuts and Jobs Act expanded bonus depreciation eligibility to include used equipment, which was a significant change from prior law. Before TCJA, bonus depreciation was limited to new equipment. Now, a used dump truck that you purchase and place in service qualifies for the same percentage bonus depreciation as a new one, as long as you have not previously owned or used the property.
This makes used truck purchases particularly interesting from a tax perspective. A well-maintained tandem-axle truck purchased at $90,000 rather than a new equivalent at $160,000 carries a lower financing obligation while still delivering a significant first-year deduction when combined with bonus depreciation. The combination of lower price and strong year-one tax benefit makes quality used trucks compelling for profit-minded operators.
Which Operators Should Pay Attention to This
Profitable operations buying in a strong year. If your aggregate or construction hauling business had a great year and you are looking at a tax bill, buying a truck and electing bonus depreciation reduces that bill directly. The deduction is most valuable when your marginal tax rate is highest.
Operators with losses from a prior year who want to maximize the carry-forward benefit. Using bonus depreciation to generate an NOL in a higher-income year creates a deduction that shelters future income. This is a more nuanced tax play and requires accounting guidance to execute properly.
Multi-truck operators running equipment in sand and gravel quarries or excavation where multiple trucks are purchased in the same year. Each qualifying unit gets its own bonus depreciation election. Four trucks at $150,000 each, with 60% bonus depreciation, generates a first-year deduction of $360,000 on $600,000 of equipment. That is a real dollar impact on the tax return.
Buyers of major brands like Peterbilt or Western Star who are investing in newer, higher-spec units. The higher the purchase price, the larger the first-year deduction at any given bonus percentage.
How Bonus Depreciation Interacts with Financing
Financing the truck does not reduce the depreciation deduction. The full purchase price is the depreciable basis regardless of how much you borrowed. If you finance $170,000 of a $175,000 truck with a $5,000 down payment, the depreciable basis is still $175,000 for both Section 179 and bonus depreciation purposes.
The effective cost of the financing is reduced by the tax savings. If bonus depreciation generates $50,000 in tax savings in year one, that cash comes back through your reduced tax payment (or increased refund) and can be applied to loan payments. The truck is essentially partially funding its own financing through the tax benefit in the first year.
For operators who want to lease rather than buy, bonus depreciation does not apply to standard operating leases. It requires ownership of the asset. See the discussion in our equipment lease page for how tax treatment differs between loans and leases.
Bonus Depreciation Questions We Hear
Close Before Year-End, Claim in Year One
If you want the deduction in a specific tax year, the truck needs to be placed in service before December 31. Let us know your timeline and we will work to close in time. Applications are reviewed same or next business day.
