What is the Section 179 deduction?
Recently made a vehicle or equipment purchase for your business? Heard about Section 179 or simply looking for possible deductions for your purchase?
Section 179 is one tax deduction you’ll want to learn about.
IRS Section 179 allows business owners to expense part or all of the cost of qualifying property acquired by purchase, including financing, and placed in service during the tax year. Eligibility, business-use and deduction limits apply.
It can accelerate deductions that would otherwise be spread over several years. Buying equipment alone does not establish eligibility or guarantee an immediate deduction for its full cost.
Section 179 was originally created by the U.S. government to encourage businesses to invest in themselves and spur growth, and it helps you do just that.
What is the Section 179 deduction limit for 2026?
Section 179 limits change with legislation and inflation adjustments. The figures below apply to tax years beginning in 2026, as listed in IRS Publication 946.
The Section 179 limits and guidelines for 2026 are as follows:
| Rule | Amount |
|---|---|
| General maximum deduction | $2,560,000 |
| Phaseout starts when qualifying property costs exceed | $4,090,000 |
2026 tax-year deduction limit: $2,560,000
Qualifying new and used equipment and eligible off-the-shelf software may qualify. The deduction is also subject to a taxable-business-income limit; amounts disallowed by that limit may generally be carried forward.
For a calendar-year business claiming a 2026 deduction, eligible property must be placed in service during 2026. It does not have to be used for the entire year.
2026 phaseout threshold: $4,090,000
This threshold reduces the available deduction; it is not a limit on how much equipment a business may buy.
The $2,560,000 maximum is reduced dollar for dollar when qualifying property placed in service exceeds $4,090,000. The general Section 179 deduction is fully phased out at $6,650,000, before considering other applicable limits.
What qualifies as Section 179?
After viewing the deduction limits and spending cap on Section 179, it might sound extremely attractive, but how do you know if your equipment purchase qualifies?
Your business may qualify if it acquires eligible property for business use and places it in service during the tax year. Check the property type and applicable limits before claiming the deduction.
Many types of equipment and eligible off-the-shelf software qualify. Property is placed in service when it is ready and available for its intended business use; use from January through December is not required.
Keep in mind that you must have used the piece(s) of equipment you’d like to deduct more than 50% of the time for business purposes for those pieces of equipment to qualify under Section 179.
For mixed business and personal use, multiply the cost by the business-use percentage to determine the business portion. The deductible amount is then subject to Section 179 and any vehicle-specific limits.
For example, 90% business use of a $35,000 vehicle produces a $31,500 business portion of its cost. That is not automatically a $31,500 deduction: vehicle classification, annual caps and other limits can reduce the amount allowed.
Do vehicles qualify for Section 179?
Yes! Vehicles qualify for Section 179.
Passenger automobiles and certain SUVs have special deduction limits. For 2026, the Section 179 cap for covered heavy SUVs is $32,000; some qualifying vehicle configurations are excepted from that SUV cap. Other depreciation and eligibility rules still apply.
Section 179 is still a powerful deduction you can utilize for business vehicle purchases, provided the vehicle itself qualifies.
Examples of vehicles that may qualify, subject to their configuration and use, include:
- Most heavy-duty construction vehicles
- Forklifts
- “Over-the-road” tractor-trailers
- Shuttle vans designed to seat more than nine passengers behind the driver’s seat
Also, vehicles with these three properties:
- Fully-enclosed cargo area
- No seating behind the driver area
- And classic cargo vans and other vehicles that have no front body section that protrudes more than 30 inches in front of the leading edge of the windshield.
Vehicle type, weight, configuration and business use matter; not every vehicle receives the same deduction. A true lease generally does not give the lessee a Section 179 deduction for the vehicle’s purchase price. Check IRS Form 4562 instructions for the applicable limits.
Historical Section 179 example: 2019
Steve owns a construction business in Northern California. He invested in several new pieces of construction equipment for his business in 2019, totaling $1,400,000.
Assume the equipment qualified, was placed in service in 2019, was used entirely for business, and Steve had sufficient taxable business income. The 2019 general Section 179 maximum was $1,020,000. Separate 100% bonus-depreciation rules could cover the remaining $380,000 if eligible. See 2019 IRS Publication 946.
As a result, his total deduction breaks down as follows:
- Equipment purchase cost: $1,400,000
- Section 179 deduction: $1,020,000
- Bonus first-year depreciation for 2019 tax year (100%): $380,000
- Total deduction: $1,400,000
- Total tax savings (Assuming 35% tax rate): $490,000
Get the most from this tax season
Section 179 can accelerate eligible equipment deductions, but the benefit depends on your tax position. The example above uses an assumed 35% tax rate for illustration; actual federal and state treatment may differ. Confirm your election and limits with a tax professional.
It’s a useful tax code that means both huge savings and more flexibility for business owners who need and want to invest in equipment that can help them grow their business in a way that is maximally cost-effective.
Make the most of IRS Section 179 so that you can focus on growing your business. And while you’re at it, check out our other tax-related guides:
