Expanded Section 179 Deduction Could Accelerate Fleet Electrification
IRS Notice 2026-11 clarifies combining Section 179 expensing with 100% bonus depreciation for commercial EVs.
As diesel prices rise and commercial electric trucks reach customers, updated IRS guidance on Section 179 expensing and bonus depreciation offers fleet operators significant first-year tax deductions for electrification efforts.
What Happened
The One Big, Beautiful Bill Act (OBBBA) of 2025 modified the Internal Revenue Code, specifically expanding Section 179 and restoring 100% bonus depreciation under Section 168(k). The revised Section 179 allows for a 100% deduction on equipment purchases, with the limit doubling to $2.5 million. A phase-out begins at $4 million in capital investments, dropping to zero at $6.5 million. Additionally, the IRS issued Notice 2026-11, which provides guidance on the permanent restoration of 100% bonus depreciation for qualifying property acquired after January 19, 2025. The IRS does not distinguish between fuel types for depreciation categories; tractor units for over-the-road use are classified as 3-year properties, while other commercial vehicles like garbage trucks, vocational trucks, and reefer trailers are classified as specialized business vehicles.
Why It Matters
Although the Commercial Clean Vehicle Credit (Section 45W) expired on September 30, the enhanced Section 179 deduction remains a potent tool for fleet electrification. The new rules allow businesses to combine Section 179 expensing with bonus depreciation, meaning a fleet operator can expense a portion of a qualifying vehicle under Section 179 and apply bonus depreciation to the remaining basis. This combination could allow businesses to deduct the entire qualifying business-use cost of an electric truck or charging infrastructure in the first year. The expansion applies to new and used vehicles, charging infrastructure, battery energy storage systems, and specialized tools, provided they are new to the purchaser. This financial incentive may help offset the higher upfront costs of electric trucks, such as Tesla’s Semi, against rising diesel prices which are approaching $7 per gallon.
The Bottom Line
While the expiration of specific EV credits raised concerns about a Q4 sales slowdown, the turbocharged Section 179 deduction and restored bonus depreciation provide substantial tax relief for commercial EV buyers. Fleet operators should consult tax professionals to navigate the complex requirements for combining these deductions and determining when equipment is considered acquired under a written, binding contract.
