If you buy equipment, software, or certain business-use vehicles for your business, the Section 179 deduction may let you write off all or part of the cost in the year you place the asset in service. Instead of spreading the deduction over several years through depreciation, you can often claim it right away and reduce your current-year taxable income.
One important limitation: Section 179 generally can't be used to create or increase a business loss. The deduction is limited by your business's taxable income.
What Is the Section 179 Deduction?
Normally, business assets must be depreciated over their useful lives. Section 179 allows eligible businesses to elect an immediate deduction for qualifying property placed in service during the tax year. This can provide a larger tax benefit upfront and improve cash flow.
How Section 179 Works
With Section 179, you may be able to:
- Deduct all or part of a qualifying asset's cost in the year it's placed in service
- Choose how much of the eligible cost to deduct (up to applicable limits)
- Reduce your taxable business income for the current tax year
- Apply the deduction to both new and used qualifying property
Many businesses use Section 179 alongside other depreciation methods to maximize tax benefits.
Benefits of Section 179
- Immediate tax savings instead of waiting years to recover costs
- Improved cash flow that can be reinvested in your business
- Incentives to upgrade equipment, technology, and other business assets
- Flexibility to select the amount you want to expense (subject to IRS rules)
What Property Qualifies for Section 179?
Eligible property generally includes tangible assets used in a trade or business, such as:
Equipment and Machinery
- Manufacturing equipment
- Tools and heavy machinery
- Office equipment and furniture
Technology and Software
- Computers and laptops
- Off-the-shelf software
- Certain office technology systems
Business Vehicles
- Business-use vehicles
- Certain SUVs and trucks, subject to specific limits
Qualified Real Property Improvements
Certain improvements to nonresidential real property may qualify, including:
- HVAC systems
- Roofing
- Fire protection and alarm systems
- Security systems
- Qualified improvement property (QIP)
Section 179 Limits
Section 179 is subject to annual IRS limits. For tax years beginning in 2025, the maximum Section 179 deduction is $2.5 million, and the deduction begins to phase out when qualifying property purchases exceed $4 million. The maximum Section 179 deduction for qualifying SUVs is $31,300. These amounts may be adjusted for future tax years.
Important Rules to Know
Business-Use Requirement
The property must be used more than 50% for business purposes.
Taxable Income Limitation
Your Section 179 deduction is generally limited to your taxable income from the active conduct of a trade or business. If your allowable deduction exceeds that limit, you may be able to carry the unused portion forward to a future year.
Placed-in-Service Requirement
The property must be purchased and placed in service during the tax year for which you're claiming the deduction. Simply purchasing an asset isn't enough; it must be ready and available for business use.
Section 179 vs. Bonus Depreciation
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Deduction flexibility | You choose the amount to deduct | Generally applies automatically |
| Taxable income limitation | Yes | No |
| Phase-out based on purchases | Yes | No |
| Eligible property | Selected qualifying assets | Most qualifying assets |
Bonus depreciation is generally claimed after any allowable Section 179 deduction. For qualified property acquired and placed in service after January 19, 2025, 100% bonus depreciation may be available under current law.
Example
Let's say your business purchases $50,000 of qualifying equipment and places it in service during the tax year.
- With regular depreciation, you would generally recover the cost over several years.
- With Section 179, you may be able to deduct up to the full $50,000 immediately, subject to the applicable limitations.
When Section 179 May Not Be the Best Option
You may want to consider other depreciation strategies if:
- Your business has little or no taxable income
- You expect to be in a higher tax bracket in future years
- You prefer to spread deductions across multiple years
Every business situation is different, so it may help to compare the long-term tax impact of each option.
How to Claim a Section 179 Deduction
To enter a Section 179 deduction:
- Go to Federal > Income
- Choose to select your forms
- Edit the Schedule associated with the business activity
- Select Depreciation
- Select Assets
- Enter the asset information
- Enter the desired amount in the Section 179 deduction field
Special Rules for Vehicles
Some vehicles aren't subject to the Section 280F depreciation limits, including:
- Automobiles with an unloaded gross vehicle weight (GVW) over 6,000 pounds
- Trucks and vans with a loaded GVW over 6,000 pounds
- Qualified nonpersonal-use vehicles
Even when business use exceeds 50%, taxpayers may elect straight-line depreciation using the applicable recovery period instead of claiming Section 179.