How Section 179 Works
Instead of spreading a deduction over 5, 7, or even 39 years through depreciation, Section 179 lets you take the entire deduction in year one. You buy a $50,000 piece of equipment, you deduct $50,000 that year. The asset must be purchased and placed in service during the tax year, and it must be used more than 50% for business purposes. If you use an asset for both personal and business purposes, you can only deduct the business-use percentage.What Qualifies for Section 179
Qualifying property includes tangible personal property like machinery, equipment, computers, office furniture, and certain software. Vehicles over 6,000 lbs GVWR (like SUVs and trucks) qualify with a $30,500 cap for SUVs. Leasehold improvements to commercial property also qualify. What doesn't qualify: real property (buildings), land, inventory, and property used outside the U.S.
2025 Section 179 Limits
The 2025 deduction limit is $1,250,000 with a phase-out threshold of $3,130,000 in total equipment purchases. Once total purchases exceed the threshold, the Section 179 deduction begins to phase out dollar-for-dollar. The deduction cannot exceed your business's taxable income for the year (but you can carry forward unused amounts).
The 2025 deduction limit is $1,250,000 with a phase-out threshold of $3,130,000 in total equipment purchases. Once total purchases exceed the threshold, the Section 179 deduction begins to phase out dollar-for-dollar. The deduction cannot exceed your business's taxable income for the year (but you can carry forward unused amounts).
Example: Equipment Purchase
You buy a $75,000 CNC machine for your woodworking business in March. Under Section 179, you deduct the full $75,000 on your current year tax return instead of depreciating it over 7 years (~$10,714/year). At a 32% tax bracket, that's $24,000 in tax savings this year vs. $3,428 with regular depreciation.
Section 179 vs. Bonus Depreciation
Both let you deduct costs faster, but they work differently. Section 179 has a dollar cap ($1,250,000) and can't exceed business income. Bonus depreciation has no dollar limit and can create a net operating loss. Section 179 requires you to choose which assets to apply it to. Bonus depreciation applies automatically to all eligible assets unless you opt out. Most small businesses should use Section 179 first, then bonus depreciation for anything remaining.Track Depreciable Assets in Hivebooks
Hivebooks auto-categorizes equipment purchases and flags assets that may qualify for Section 179 or bonus depreciation, so nothing slips through at tax time.
Try Hivebooks Free →