What Are the Section 179 Deduction Limitations?

The Section 179 deduction lets you elect to deduct all or part of the cost of qualifying business property in the year you place it in service, instead of depreciating the cost over several years.

This election can provide a larger deduction upfront and may reduce your taxable business income sooner.

How Much Can You Deduct?

For property placed in service during the tax year, the IRS sets an annual maximum Section 179 deduction amount.

For the most recently published IRS limits, the maximum Section 179 deduction is $2,500,000. If you place multiple qualifying assets in service during the year, you can allocate the deduction among those assets, but your total Section 179 deduction generally cannot exceed the annual limit. 

You are not required to claim the full deduction. You can choose to expense only a portion of the cost and depreciate the rest.

When Is the Deduction Reduced?

The Section 179 deduction begins to phase out when the total cost of qualifying property placed in service during the year exceeds a certain threshold.

For the most recently published IRS limits:

• The phaseout begins when qualifying property placed in service exceeds $4,000,000. 
• Your deduction is reduced dollar-for-dollar by the amount over that threshold. 
• Once qualifying purchases are high enough to completely eliminate the allowable deduction, you can no longer claim a Section 179 deduction for that year.

Special Rules for SUVs and Certain Vehicles

A special Section 179 limit applies to many sport utility vehicles (SUVs).

For the most recently published IRS limits, the maximum Section 179 deduction for qualifying SUVs is $31,300.

This limit generally does not apply to:

• Vehicles designed to seat more than nine passengers behind the driver.
• Vehicles with a cargo area at least six feet long that is not readily accessible from the passenger compartment.
• Certain heavy-duty work vehicles that have no seating behind the driver and meet IRS design requirements.

How Does Section 179 Work for Married Taxpayers?

If you're married and file a joint return, both spouses are treated as a single taxpayer when applying the Section 179 limits, regardless of which spouse purchased the property.

If you're married and file separate returns, both spouses are still treated as one taxpayer for purposes of the overall dollar limitation and phaseout calculation. The annual Section 179 limit must be allocated between both spouses. If no allocation is made, the IRS generally treats the limit as split equally between the spouses.