Compute immediate Section 179 deduction on business equipment.
Section 179 deduction
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Expensing equipment in the year you buy it
Normally, when a business buys a piece of equipment, it cannot deduct the full cost right away. The cost is capitalized and written off over five or seven years through depreciation. Section 179 of the tax code lets a small business skip that wait and deduct the entire purchase price in the year the asset is placed in service, up to a generous annual limit. The cash-flow benefit is the whole point: a deduction today is worth more than the same deduction spread across the rest of the decade. This tool applies the 2026 figures the law projects, a deduction cap of $1,220,000 and a phase-out that begins once total equipment purchases pass $3,050,000.
Section 179 covers tangible business property such as machinery, computers, office furniture, off-the-shelf software, and qualifying vehicles. Land and most buildings do not qualify. The asset must be used more than half the time for business and must actually be placed in service during the tax year, not merely ordered.
A $200,000 machine against $500,000 of income
Take the defaults: a $200,000 equipment purchase, $500,000 of business taxable income, and a 32 percent marginal rate. The purchase is well under the $1,220,000 cap and well under the $3,050,000 phase-out floor, so the full $200,000 is deductible. It is also limited to your business income, and $500,000 comfortably covers it. The deduction is therefore the full $200,000, and at a 32 percent marginal rate that translates to $64,000 of tax saved this year. You still bought a $200,000 asset; what Section 179 does is let the government effectively fund $64,000 of it through a lower tax bill.
The income ceiling that trips up new buyers
The rule that surprises people is the business income limitation. Section 179 cannot create or deepen a loss. The deduction is capped at your taxable business income for the year, so if you buy $80,000 of equipment but the business only earned $50,000, you can deduct $50,000 now and the remaining $30,000 carries forward to a future year. This is why a brand-new business that spends heavily on gear in its first, low-income year may not get the immediate write-off it expected. Plan large purchases for a year when you have the profit to absorb them, or be ready to carry the excess forward.
Section 179, bonus depreciation, and MACRS
Section 179 is one of three ways to recover an asset's cost, and they interact. Bonus depreciation is a separate provision that also allows accelerated write-offs, often applied after Section 179 to expense whatever remains, with no business income limit so it can create a loss. This tool models Section 179 only and does not compute a bonus depreciation amount, partly because the bonus percentage has been in legislative flux and is not safe to anchor to a fixed figure here. The third path is ordinary MACRS depreciation, spreading the cost over the asset's class life. A practical tip: layer Section 179 first up to your income, then consider bonus depreciation for the rest, and keep MACRS in mind when you would rather spread deductions into future higher-income years. One common mistake is electing a huge deduction that wipes out income you needed to absorb other credits, so model the whole return, not just this one line. Section 179 is claimed on Form 4562.
Are vehicles eligible for Section 179?
Many are, but heavy SUVs and trucks face a special dollar cap that is far below the general limit, while passenger autos are restricted by separate luxury-auto depreciation rules. Work vehicles such as cargo vans with no passenger seating behind the driver, or trucks with a bed over six feet, can often be expensed more fully. Confirm the gross vehicle weight rating and the specific limit before assuming a full write-off.
What happens if I sell the equipment later?
Selling or converting the asset to personal use before the end of its recovery period triggers depreciation recapture. You may have to add part of the previously deducted amount back into income, often taxed as ordinary income rather than capital gain. Factor that in before expensing something you expect to flip within a couple of years.