Section 179 Tax Deductions for Small Businesses

Section 179 of the IRS Code encourages business owners to invest in equipment or technology by allowing them to deduct a substantial amount of the asset’s value in the first year. That means if you put your equipment in use before December 31, 2025, you may be able to deduct up to $1,250,000 from your federal income taxes.

Additionally, you might be eligible for Bonus Depreciation as well, meaning you could deduct additional depreciation for the cost of qualifying business property, beyond regular depreciation allowances. For 2025, the bonus depreciation stands at 40%, a 20% drop from last year but 20% higher than 2026.

How do I know if Section 179 applies to my business?

• A sole proprietor, partnership, or corporation can fully expense qualified tangible business property the year it is put in use if the qualifying assets are used for business purposes more than 50% of the time.
• The equipment must be delivered and put into use by December 31, 2025.
• The business cannot spend more than $4.38 million per year for equipment.

Can I finance equipment and still take the deduction?

Yes, capital leases and equipment finance agreements should qualify for the Section 179 deduction.

Does Section 179 only apply to new equipment?

No. Even used equipment can qualify for the deduction. It may even qualify for bonus depreciation, provided it is “first use” by the purchasing business.

Taking advantage of your potential savings with Section 179 means freeing up cash for operations, staffing, or even expansion. It also means your business could take advantage of modern equipment and software without waiting years to recover those costs.