Question

I enjoy your articles on the dollars-and-cents aspects of buying antique furniture for use in a business.

It would be interesting if you could give an example of, say, buying an antique or classic car versus a new car as a business-use vehicle. Let's say, a 1972 Pontiac GTO versus a 2026 Lexus IS.

Answer

Good question!

Our answer considers:

• the classic or antique car as a write-off;

• how the old law often disallowed classic cars;

• how the new law works to your benefit;

• what the IRS thinks of this;

• why the term "recovery property" makes this possible;

• how you are shielded from an IRS attack; and

• how the classic car shows you the money.

Classic or Antique Car as a Write-off

To deduct the classic or antique car:

• the car must be of a type that's subject to wear and tear, decay, decline, or exhaustion; and

• the car must be used in your trade or business.

According to the courts, this language is unequivocal (i.e., it allows for no doubt or misinterpretation).

There's no question that driving the 1972 GTO in the course of your business would subject that car to wear and tear, decay, and exhaustion.

Old Law

In 1981, lawmakers simplified depreciation deductions and removed the requirements of "salvage value" and "estimated useful life," both of which could have prevented your write-off of the GTO.

New Law

As a result of the 1981 changes, both Brian P. Liddle and Richard Simon won tax deductions for rapidly appreciating almost 300-year-old rare violins and violin bows coveted by collectors.

The courts noted that although the violins and bows would not have been depreciable under pre-1981 law, depreciation simplification in the 1981 law enabled the deductions for antique violins and bows that were used by musicians.

IRS Position

In its Action on Decision 1996-009, the IRS said that it would not follow the Liddle and Simon cases and that it expected to bring a case in a different circuit. The IRS wanted to create a different result so it could appeal antique depreciation to the Supreme Court in the hopes that the court would rule that antiques are no longer deductible.

We have to point out that for the past 30 years, the IRS has not found a conflicting case to bring to trial, much less one that might produce a result different from Liddle and Simon.

Removal of Term "Recovery Property"

The taxpayers in Liddle and Simon won their cases based on a 1981 law that created the term "recovery property" as a replacement for the term "depreciation."

A 1986 law deleted the term "recovery property" from Section 168 depreciation, but as the court noted in Selig, that change did nothing to impact the favorable results for antique depreciation in Liddle and Simon.

In Selig, a court case that involved post-1986 law and that triggered the IRS Action on Decision, the court stated that it would follow Liddle and Simon. As a result, if Selig could show that the exotic automobiles he desired to depreciate were subject to exhaustion, wear and tear, or obsolescence, he could then depreciate them.

Shield against IRS Attack

The IRS does not like to bring a case to court that it will lose.

Further, should the IRS bring a case where its position is "not substantially justified," then you can collect attorney fees and court costs from the IRS if your net worth is less than $2 million.

If the IRS has lost in courts of appeal on substantially similar issues, then the IRS is automatically presumed to be "not substantially justified" and you win attorney fees and court costs.

You have a big shield to protect you, thanks to the Liddle and Simon victories. It's highly likely that you would win attorney fees and court costs should the IRS attack your 1972 GTO tax deductions. And what this really means is that the IRS is not looking for a fight with you on your 1972 GTO tax deductions, because it has little chance of winning.

Show Me the Money

Thank the One Big Beautiful Bill Act (OBBBA) for making the money equation easy. The OBBBA, signed into law on July 4, 2025, permanently restored 100 percent bonus depreciation for qualifying property acquired and placed in service after January 19, 2025—reversing the phasedown that had cut bonus depreciation to 40 percent in 2025 and would otherwise have dropped it to 20 percent in 2026 and to zero in 2027.

And just as under the Tax Cuts and Jobs Act (TCJA) before it, the law uses the same depreciation schedule for both new and used cars, so you encounter no depreciation differences between the 2026 Lexus IS and the 1972 GTO.

One caveat keeps the numbers honest. Because both the GTO and the Lexus are passenger automobiles—four-wheeled vehicles rated at 6,000 pounds or less—they fall under the Section 280F luxury-auto caps, which limit how much depreciation you can claim each year regardless of bonus depreciation.

For a vehicle placed in service in 2026 and eligible for bonus depreciation, your first-year deduction is capped at $20,300, then $19,800 in year two, $11,900 in year three, and $7,160 for each year after that.

So even with 100 percent bonus depreciation restored, you can't write off the full price of either car in Year One. The good news for your comparison: the cap applies identically to both vehicles, so it doesn't tilt the new-versus-used decision.

Of course, we expect that you will incur more repairs and higher operating costs with the 1972 GTO than with the 2026 Lexus IS.

But after, say, five years of use, you should be able to sell the 1972 GTO for much more than you could sell the Lexus, which will decline to about 40 percent or so of the $50,000 you would pay for it.

In other words, your GTO could give you a profit of, say, $30,000 to $50,000 compared with the Lexus.

Takeaways

You first have to thank taxpayers Liddle and Simon for winning their antiques cases not only in the tax court but also at the appeals level. Thanks to them, you can deduct your 1972 GTO because, like them, you are going to use your GTO in your business.

You also have to thank the TCJA—and now the OBBBA—for putting depreciation of both new and used vehicles on the same footing, with 100 percent bonus depreciation now restored on a permanent basis. You look at the same depreciation schedules for both vehicles, which simplifies and clarifies a big chunk of your money decision.

And it's good to know that if your net worth is less than $2 million and you have to win your deductions in court (a highly unlikely event), the IRS will have to pay your attorney fees. The possibility of an IRS challenge against your 1972 GTO deduction is slim