The expanded Section 179 deduction could give fleet operators another incentive to replace diesel equipment with electric alternatives. The provision allows businesses to expense qualifying equipment, and the IRS does not separate electric and diesel vehicles into different depreciation categories. Instead, eligibility depends on factors such as the vehicle’s use and property classification.
Under the applicable depreciation rules, over-the-road tractor units are classified as three-year property and fall below the 20-year recovery threshold for 100% bonus depreciation. As a result, Tesla’s electric Semi can potentially qualify for Section 179 in the same way as a comparable diesel tractor. The same framework may apply to other specialized business vehicles, including electric garbage trucks, vocational trucks, battery-electric refrigerated trailers and some large electric forklifts.
The changes follow the One Big, Beautiful Bill Act, which increased the Section 179 limit for 2025. The provision permits a 100% deduction for qualifying equipment purchases, with the maximum amount raised to $2.5 million. The deduction begins to phase out when capital investments reach $4 million and disappears at $6.5 million. Qualifying purchases can include new or used vehicles, charging infrastructure, battery energy storage systems and specialized tools, provided the equipment is new to the buyer.
The IRS also issued Notice 2026-11 with additional guidance on the permanent restoration of 100% bonus depreciation for qualifying property acquired after January 19, 2025. Section 179 and bonus depreciation can be used together: a business may expense part of a purchase under Section 179 and apply bonus depreciation to the remaining eligible basis. Depending on the purchase and the applicable limitations, that combination could allow the entire qualifying business-use cost of an electric truck or other commercial equipment to be deducted in the first year.
The timing and structure of an order matter. The IRS has specific rules for determining when equipment is considered acquired under a written, binding contract, so businesses will need to review those requirements with a tax professional and their equipment dealer.
The expanded deduction does not apply only to electric trucks. The same rules may benefit fleets purchasing electric terminal tractors, charging systems and other commercial equipment. However, Section 179 is an expense deduction rather than a tax credit, and eligibility depends on the details of each transaction.
Businesses considering fleet electrification should consult a certified accountant or tax specialist about federal, state and local requirements, as well as the specific limitations that apply to their equipment and intended business use.
Sources: Electrek.