Frequently Asked Questions About
Why was Section 179 created?
Section 179 was created as part of a government stimulus act to encourage small businesses to invest in their growth by providing accelerated depreciation and tax deductions on qualifying business purchases.
What is the 2025 Annual Deduction Limit?
For the 2025 tax year:
Maximum Deduction Limit: $1,230,000
Phase-Out Threshold: $3,030,000
If your total equipment purchases exceed the $3.03 million threshold, your Section 179 deduction is reduced dollar-for-dollar. Once you reach $4.26 million in purchases, the deduction is fully phased out.
What is Bonus Depreciation?
Following the One Big Beautiful Bill, the rules for bonus depreciation in 2025 are as follows:
40% bonus depreciation is allowed for qualifying assets placed in service between January 1 and January 19, 2025.
100% bonus depreciation is restored for qualifying equipment placed in service on or after January 20, 2025, through the end of the tax year.
Bonus depreciation can be applied after your Section 179 deduction, accelerating the deduction of the remaining asset value.
What types of purchases qualify for Section 179?
You can use Section 179 and bonus depreciation for a wide range of business equipment, including:
- Construction and heavy machinery
- Trucks, trailers, and commercial vehicles
- Manufacturing equipment
- Computers, servers, and office tech
- Software (off-the-shelf)
- Office furniture and fixtures
To qualify, equipment must be purchased or financed and placed in service during 2025 and used for business purposes at least 50% of the time.
Can you apply the Section 179 deduction and/or bonus depreciation to financed equipment?
Yes, for eligible companies, choosing to finance equipment purchases can help organizations save when the finance agreement enables you to take advantage of Section 179! Talk to your tax advisor to determine the type of financing that best suits your company's unique tax needs.
How do I take advantage of the Section 179 Deduction?
If your company and the assets qualify, fill out applicable parts of IRS Form 4562 and include it with your tax filing.
To elect the Section 179 tax deduction, qualifying assets must be purchased and put into service during the tax year for which you are electing the deduction.
