Quick answer: Section 179 of the tax code lets a business deduct the full cost of qualifying equipment and software in the year it’s placed in service, instead of depreciating it over several years. Financed equipment can qualify too, so you may be able to deduct the full purchase price while paying for it over time. The deduction limit was raised to $2.5 million for 2025 and is adjusted for inflation in later years; confirm the current limits and your eligibility with your tax advisor.
How Section 179 works
Normally, equipment is depreciated, meaning you deduct part of its cost each year over its useful life. Section 179 lets you elect to deduct the cost up front, up to an annual limit, as long as the equipment is used more than 50% for business and is placed in service during the tax year. The deduction phases out for businesses that buy more than a certain total amount of equipment in a year.
What typically qualifies
| Usually qualifies | Usually does not qualify |
|---|---|
| Machinery and production equipment | Land and most buildings |
| Computers and off-the-shelf software | Property used mostly for personal purposes |
| Office furniture and equipment | Property bought from a related party |
| Business vehicles (with limits for many passenger vehicles) | Property used outside the U.S. |
| Certain building improvements, like roofs and HVAC |
Section 179 and financing
Because the deduction is based on the equipment being placed in service, not on paying it off, financed equipment can qualify. That’s why many businesses buy and finance equipment before year-end: the tax savings in the first year can offset a large share of the cost while payments are spread out.
Example
A business buys $150,000 of qualifying equipment and places it in service in December. If it qualifies and elects Section 179, it may be able to deduct the full $150,000 that year instead of a smaller depreciation amount, lowering its tax bill. The actual savings depend on the business’s tax bracket and income.
What to confirm with your tax advisor
- The current year’s deduction limit and phase-out threshold
- Whether your equipment qualifies and meets the 50% business-use test
- Whether bonus depreciation or Section 179 is better for you
- Taxable income limits that can cap the deduction
- State tax treatment, which can differ from federal
This article is general information, not tax advice.
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Frequently Asked Questions
What is the Section 179 deduction?
It lets a business deduct the full cost of qualifying equipment and software in the year it is placed in service, instead of depreciating it over several years.
Can I take Section 179 on financed equipment?
Yes, financed equipment can qualify as long as it is placed in service during the tax year and meets the other requirements.
What is the Section 179 limit?
The limit was raised to $2.5 million for 2025 and is adjusted for inflation in later years, with a phase-out for large equipment purchases. Confirm current limits with the IRS or your tax advisor.
Do I have to pay off equipment to claim Section 179?
No. The deduction is based on the equipment being bought and placed in service, not on paying it off.
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