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Planning for Tax Season with Section 179

Year:
2024

As tax season approaches, it’s a great time to explore how Section 179 can benefit your small to mid-sized business by offering potential tax savings on essential equipment purchases you’ve made throughout the year. If you are looking to use this tax code for the 2026 tax season, there are a few changes you should be aware of.

Please note that we at FSIP Electronics ARE NOT tax experts or advisors. Please seek a professional tax advisor or talk to your tax accountant before deciding if this deduction is right for you and your business.

We are also not responsible for any faults with tax returns. Not qualifying for Section 179 IS NOT grounds for a refund on purchased products. All referenced numbers in this blog are subject to change without notice by the IRS.

Section 179 Explained

Section 179 is a piece of tax code that allows small to mid-sized businesses to deduct the full purchase price of eligible equipment within the year it was purchased. It was designed to provide smaller businesses with a more immediate tax benefit instead of allowing it to depreciate overtime in future tax years.

Section 179 vs. Bonus Depreciation

While both Section 179 and Bonus Depreciation allow businesses to deduct the cost of eligible equipment in the year they were purchased, there are key differences between the two.

Section 179 is limited to your amount of taxable income, which means you cannot deduct more than your business’s annual income. This piece of tax code also has a maximum write off limit for each year. Section 179’s maximum deduction was increased to $2,560,000 for tax years beginning in 2026 with a $4,090,000 phase-out threshold. Once the $4,090,000 limit is hit, the deduction will begin decreasing dollar-for-dollar until it is fully phased out at $6,650,000.

Bonus Depreciation is a tax incentive that is useful for businesses that spend more than Section 179’s Total Equipment Purchase Limit ($4,090,000) and allows businesses to accelerate the depreciation of eligible assets instead of writing them off over the useful life of the assets. There is no income limit with Bonus Depreciation, nor is there an annual deduction limit. For 2025, businesses can deduct 100% of the cost of eligible equipment that was purchased and put into use after January 19th, 2025.

It’s not uncommon to use both Section 179 and Bonus Depreciation together, however, Bonus Depreciation is typically used after the spending cap ($4,090,000) has been reached for Section 179.

Section 179 Eligible Expenses

Section 179 covers a large range of both new and used equipment. Please refer to Section179.org to view the full list of eligible equipment.

In order for the purchase to be an eligible expense, the equipment has to be new to the buyer, account for more than 50% business use, and has to be purchased and put in-use within the current tax year it is being deducted from.*

The equipment must also be acquired by the company through an exchange of money, it cannot be inherited or gifted.

*Purchased and put in-use is defined by “the moment a piece of property is ready and available for a specific use,” (i.e. if you plan to deduct any equipment in 2025, it needs to be purchased and put in-use by midnight December 31st, 2025 to qualify).