Section 179 Tax Benefits

What is the Section 179 Deduction

Most people think the Section 179 deduction is some mysterious or complicated tax code. It really isn't, as you will see below.

Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.

Several years ago, Section 179 was often referred to as the "SUV Tax Loophole" or the "Hummer Deduction" because many businesses have used this tax code to write-off the purchase of qualifying vehicles at the time (like SUV's and Hummers). But that particular benefit of Section 179 has been severely reduced in recent years (see 'Vehicles & Section 179' for current limits on business vehicles.)

However, despite the SUV deduction lessened, Section 179 is more beneficial to small businesses than ever. Today, Section 179 is one of the few government incentives available to small businesses, and has been included in many of the recent Stimulus Acts and Congressional Tax Bills. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much needed tax relief for small businesses - and millions of small businesses are actually taking action and getting real benefits.

Limits of Section 179

For tax years beginning in 2026, businesses may deduct up to $2,560,000 in qualifying purchases under Section 179. This deduction begins to phase out dollar-for-dollar once total qualifying equipment purchases exceed $4,090,000. The deduction is fully phased out once qualifying purchases reach $6,650,000.

These limits are adjusted periodically for inflation and are intended primarily to benefit small and medium-sized businesses

What's the difference between Section 179 and Bonus Depreciation?

Both Section 179 and bonus depreciation allow businesses to accelerate deductions for qualifying business assets, but they work differently.

For 2026:

• Section 179 allows businesses to choose which qualifying assets to expense, up to the annual deduction limit. It is generally limited by the business's taxable income.
• Bonus depreciation generally allows 100% first-year depreciation for qualifying new and used property placed in service after January 19, 2025, and is not subject to the same annual dollar limitation or taxable income restriction. It can also create or increase a net operating loss.

When both provisions apply, businesses typically claim the Section 179 deduction first, followed by bonus depreciation on any remaining eligible basis. The best strategy depends on your business's financial situation, so it's always advisable to consult your tax advisor before making purchasing decisions.