What Is the Section 179 Deduction?
In plain English
The Section 179 deduction allows businesses to immediately expense the full cost of qualifying assets — equipment, vehicles, software, and certain improvements — in the year they are placed in service, rather than depreciating them over multiple years. It is designed to encourage small and medium businesses to invest in themselves.
What Qualifies for Section 179?
Qualifying assets include tangible personal property used in business: machinery, computers, office furniture, vehicles (with limitations), off-the-shelf software, and certain building improvements (HVAC, roofing, security systems). The asset must be used more than 50% for business and placed in service during the tax year. Real property generally does not qualify.
What Are the Section 179 Limits?
For 2026, businesses can expense up to approximately $1.25 million in qualifying assets. The deduction begins to phase out when total equipment purchases exceed approximately $3.13 million. The deduction cannot exceed your business's taxable income — you cannot create a loss with Section 179 alone.
How Does Section 179 Compare to Bonus Depreciation?
Both allow immediate expensing, but they differ: Section 179 has a spending cap and cannot create a loss. Bonus depreciation has no cap and can create a loss. Section 179 applies only to new and used property; bonus depreciation rates are phasing down after 2022. Many businesses use both together for maximum benefit.
Frequently asked questions
Can sole proprietors use Section 179?
Yes. Section 179 is available to all business types — sole proprietorships, partnerships, S-corps, and C-corps. Sole proprietors claim it on Schedule C. The deduction is limited to net business income from all sources.
Does Section 179 apply to vehicles?
Yes, but with limits. Passenger vehicles are subject to luxury auto caps (around $20,200 for the first year). SUVs over 6,000 pounds GVWR have a higher Section 179 limit of approximately $30,500. Vehicles used less than 50% for business do not qualify.
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Related terms
Depreciation
Depreciation is a tax deduction that allows business owners and investors to recover the cost of certain assets over time. It reflects the wear and tear on property used to generate income.
Self-Employment Tax
Self-employment tax covers Social Security and Medicare contributions for self-employed individuals who do not have an employer withholding these taxes. The current combined rate is 15.3%.
Tax Deduction
A tax deduction reduces your taxable income, lowering the amount of income subject to tax. The actual tax savings depend on your marginal tax bracket.
Tax Bracket
Tax brackets are the income ranges at which different marginal rates apply under the U.S. progressive tax system. Only income within each bracket is taxed at that bracket's rate.
Tax Professional
A tax professional is a qualified expert — CPA, enrolled agent, or tax attorney — who helps individuals and businesses with tax preparation, planning, and compliance.