Section 179 Deduction

Section 179 of the Internal Revenue Code allows businesses to expense — deduct in full — the cost of qualifying tangible personal property and certain software in the year it is placed in service, rather than recovering the cost through multi-year depreciation. For 2025, the maximum Section 179 deduction is $1,250,000, with a phase-out beginning when total qualifying asset purchases exceed $3,130,000.

Qualifying property includes machinery, equipment, computers, office furniture, certain vehicles, and off-the-shelf software. Most tangible personal property used in a business qualifies. Certain listed property (like passenger automobiles) is subject to additional limitations. Real property such as land and most buildings generally does not qualify, though certain improvements to nonresidential real property (HVAC systems, roofs, security systems) became eligible under the Tax Cuts and Jobs Act.

A key constraint is that the Section 179 deduction cannot exceed your business's taxable income for the year. Any amount disallowed by this income limitation can be carried forward to future years. Section 179 is especially valuable for small and medium-sized businesses that want an immediate tax deduction when purchasing equipment, providing a strong incentive for capital investment.