A Quick Guide to The Section 179 Deduction

What is Section 179 and How Does It Work?

Section 179 is a provision in the U.S. tax code that gives businesses the option to expense the full purchase price of qualifying equipment and software during the year it’s placed into service, rather than spreading out depreciation.

• Who Qualifies?
  Any not-for-profit business that operates in the U.S. that purchases, finances, or leases qualifying property for use in its operations (50% or more) may qualify. Both small and large businesses can take advantage, though there are annual spending limits.
• Example
  Suppose your business buys $50,000 worth of equipment in 2025. Instead of writing off small amounts each year through standard depreciation, you could deduct the full $50,000 in 2025, reducing your taxable income right away.

What Property Qualifies For Section 179?

The IRS allows deductions for a wide range of tangible property. Eligible items include:

• Machinery and manufacturing equipment
• Computers, servers, and business software
• Office furniture and fixtures
• Certain vehicles used for business (e.g., heavy SUVs, vans, trucks over 6,000 lbs. GVWR)
• Improvements to non-residential property (like HVAC, roofs, fire systems, and security systems)
• Livestock

Exclusions to Note:

• Real estate (land and buildings) is not eligible.
• Property used for lodging or personal purposes doesn’t qualify.
• Rental property typically does not qualify unless your business is a leasing company.

Any items acquired from a related party (family members), as well as businesses or organizations you have a relationship with, cannot be claimed under Section 179.

2025 Deduction & Spending Caps

For tax year 2025, the maximum Section 179 deduction is $2,500,000. However, this deduction begins to phase out dollar-for-dollar after $4,000,000 in qualifying purchases.

• Deduction Cap: $2,500,000
• Spending Cap: $4,000,000
• Phase-out Rule: If your purchases exceed $4M, the deduction is reduced. Once you hit $6.5M, Section 179 can’t be claimed.

This makes Section 179 especially useful for small and mid-sized businesses that don’t exceed those thresholds.

Section 179 vs. Bonus Depreciation

It’s important to understand the difference between Section 179 and bonus depreciation.

• Section 179: You can choose which assets to expense and how much of the deduction to take. It’s flexible but limited by annual caps.
• Bonus Depreciation: This applies after Section 179 and currently allows 100% (2025 tax year) of the cost of eligible property to be deducted in the first year. Unlike Section 179, bonus depreciation can create a net operating loss.

Many businesses use both provisions together, first applying Section 179, then using bonus depreciation for any remaining amounts.

How to Claim Section 179 on Your Tax Return

To claim the deduction, you’ll need to complete IRS Form 4562 (Depreciation and Amortization) when filing your business tax return. On this form, you’ll elect the Section 179 deduction and list the property placed into service during the year. Make sure to keep receipts, invoices, and financing documents in case the IRS requests verification.

Need Help?

The Section 179 deduction can be a game-changer for reducing your taxable income, but the rules and limits can get tricky, especially when combined with bonus depreciation. If you’re unsure whether your purchases qualify or how to maximize your deduction, our team at Business Tax Relief is here to help. Contact us today at 855-774-0271 for a free consultation and quote.