Maximize Your Savings with IRS Section 179 Tax Deduction

Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it's purchased or financed, rather than depreciating it over several years. This applies whether you buy the equipment outright or finance it, making equipment financing even more attractive by combining immediate tax benefits with preserved cash flow.

For 2025, businesses can deduct up to $1,250,000 in qualifying equipment purchases under Section 179. This limit applies to the total equipment purchased or financed during the tax year, not per piece of equipment.

Most business equipment qualifies including machinery, vehicles, computers, software, furniture, and fixtures used for business purposes. The equipment must be purchased for business use and placed in service during the tax year to qualify for the deduction.

Yes!  Section 179 applies to equipment, whether you purchase it outright or finance it. You can claim the full deduction in the year the equipment is placed in service, even if you're still making payments on the financing.

No, you don't need to pay off the loan. You can claim the Section 179 deduction as soon as the equipment is placed in service, regardless of your remaining loan balance. This makes equipment financing particularly attractive for tax planning.

Section 179 has a dollar limit ($1,250,000 for 2025) and phases out for businesses purchasing over $3.13 million in equipment. Bonus depreciation (40% in 2025) has no dollar limit but offers a smaller percentage deduction. Many businesses can use both on the same equipment purchase.

Yes, Section 179 applies to both new and used equipment, as long as it's new to your business and used for business purposes. The equipment must be purchased from another party (not from a related business or family member).

Section 179 begins to phase out when total equipment purchases exceed $3.13 million in 2025. For every dollar over this threshold, your Section 179 deduction is reduced by one dollar. Most small to medium businesses won't hit this limitation.

If your Section 179 deduction exceeds your business's taxable income for the year, you can carry forward the excess deduction to future tax years. However, you cannot create a loss with Section 179 - it can only reduce taxable income to zero.

Yes, but with limitations. Business vehicles over 6,000 pounds gross vehicle weight can qualify for the full Section 179 deduction. Lighter vehicles and luxury vehicles have lower deduction limits. Commercial trucks, vans, and heavy equipment typically qualify for the full deduction.

With traditional leases, the lessee typically cannot claim Section 179 since they don't own the equipment. However, with capital leases or lease-to-own arrangements, you may be able to claim the deduction. Consult your tax advisor about your specific lease structure.

Keep detailed records including purchase agreements, financing documents, invoices, proof of payment, and documentation showing when the equipment was placed in service. For financed equipment, maintain loan agreements and payment records.

Generally, the election to use Section 179 must be made on your original tax return for the year the equipment was placed in service. You cannot typically add Section 179 deductions on amended returns, so it's important to plan ahead with your tax advisor.

Equipment financing allows you to acquire more equipment in a single tax year while preserving cash flow. You can claim the full Section 179 deduction immediately while spreading the actual payments over time, maximizing both tax benefits and operational cash flow.

Absolutely. While Section 179 offers significant benefits, tax laws are complex and change frequently. A qualified tax professional can help you maximize deductions, ensure compliance, and integrate Section 179 planning with your overall business and financing strategy.