The Section 179 deduction 2026 limit is $2,560,000, and it begins phasing out dollar for dollar once a business places more than $4,090,000 of qualifying property in service during the year, disappearing entirely at $6,650,000. Combined with 100% bonus depreciation, which the One Big Beautiful Bill Act made permanent for property acquired after January 19, 2025, most small and midsize businesses can write off the full cost of equipment in the year they put it to work. This guide covers the limits, what qualifies, vehicle rules and planning tips.
Section 179 Deduction 2026 Limits
| Item | 2025 | 2026 |
|---|---|---|
| Maximum Section 179 deduction | $2,500,000 | $2,560,000 |
| Phase-out begins (total property placed in service) | $4,000,000 | $4,090,000 |
| Fully phased out | $6,500,000 | $6,650,000 |
| Heavy SUV cap (6,000 – 14,000 lbs GVWR) | $31,300 | $32,000 |
| Bonus depreciation | 100% (property acquired after Jan. 19, 2025) | 100% |
The One Big Beautiful Bill Act raised the base limit to $2.5 million and the phase-out threshold to $4 million starting in 2025, with inflation adjustments after that. The rules for claiming the deduction are in IRS Publication 946.
What Is Section 179?
Section 179 lets a business elect to deduct the cost of qualifying property in the year it is placed in service, instead of depreciating it over several years. The faster write-off lowers taxable income now and frees up cash for the business.
What Qualifies for Section 179?
- Machinery, tools and manufacturing equipment
- Computers, servers and office equipment
- Off-the-shelf software
- Office furniture and fixtures
- Business vehicles used more than 50% for business, subject to vehicle limits
- Qualified improvement property and certain improvements to nonresidential buildings, such as roofs, HVAC, fire protection, alarm and security systems
To qualify, the property must be purchased (or financed) rather than rented, placed in service during the tax year, and used more than 50% for business. Buying it in December is not enough; it must be ready and available for use by December 31.
The Business Income Limit
The Section 179 deduction 2026 cannot exceed your taxable income from active trades or businesses. Any amount you cannot use carries forward to future years. Bonus depreciation has no income limit and can create a loss, which is one reason businesses often combine the two.
Example: A business with $60,000 of taxable business income buys a $100,000 machine. It can elect Section 179 for $60,000 and carry the other $40,000 forward, or claim 100% bonus depreciation on the full $100,000 and generate a $40,000 loss. Which is better depends on the owner’s other income and the business’s outlook.
Section 179 vs. Bonus Depreciation
- Section 179 is an election made asset by asset, is capped at $2,560,000 for 2026, and is limited to business income.
- Bonus depreciation applies automatically to entire classes of property unless you elect out, has no dollar cap, and is not limited by income.
- Both can be used on new and used property, as long as used property is new to you and not bought from a related party.
Read more in our guide to bonus depreciation in 2026.
Vehicle Rules
- Heavy SUVs (6,000 – 14,000 lbs GVWR): Section 179 is capped at $32,000 for 2026. The rest of the cost can generally be recovered with bonus depreciation. See which SUVs qualify for bonus depreciation.
- Pickups and vans: Trucks with a cargo bed of at least six feet, and certain cargo vans, are not subject to the SUV cap. Our guide to trucks that qualify for Section 179 lists common models.
- Passenger cars under 6,000 lbs: Subject to the annual luxury auto depreciation caps.
- Business use over 50%: Required every year. Keep a mileage log.
Section 179 Deduction 2026 Phase-Out Example
Suppose a manufacturer places $4,200,000 of qualifying equipment in service in 2026. That is $110,000 over the $4,090,000 threshold, so the maximum Section 179 deduction drops by $110,000, from $2,560,000 to $2,450,000. The company can still claim 100% bonus depreciation on the remaining cost, so in practice it can usually write off the full $4,200,000 in the first year, subject to its own tax planning.
For most small businesses, the phase-out never comes into play. A contractor who buys a $70,000 excavator and a $15,000 trailer is far below the threshold and can expense both, as long as business income covers the deduction.
Who Benefits Most
- Contractors, landscapers and trades businesses buying trucks, trailers and heavy equipment.
- Medical, dental and professional offices upgrading technology and furniture.
- Manufacturers and farms investing in machinery.
- Owners of LLCs, S corporations and sole proprietorships, since the deduction flows through to the owner’s return. Our guide on how LLCs can lower taxable income in 2026 covers other options.
How to Claim the Deduction
- Confirm the property qualifies and was placed in service in 2026.
- Document the cost, the date placed in service and the business-use percentage.
- Elect Section 179 on Form 4562, Part I, filed with your return.
- Keep invoices, financing documents and usage logs.
Recapture If Business Use Drops
If business use of Section 179 property falls to 50% or less in a later year, part of the deduction is recaptured as ordinary income. Selling the asset can also trigger depreciation recapture, reported on Form 4797. See Section 1245 recapture for how this works.
Planning Strategies
- Time purchases: Place equipment in service before year-end to claim the deduction this year.
- Watch the phase-out: If you are near $4,090,000 of purchases, consider spreading them over two years.
- Combine incentives: Use Section 179 for assets where you want control, and bonus depreciation for the rest.
- Think about future years: A large deduction now means less depreciation later. If you expect higher income in coming years, spreading deductions out may save more.
Frequently Asked Questions
What is the Section 179 limit for 2026?
The maximum deduction is $2,560,000, phasing out once total qualifying property placed in service exceeds $4,090,000.
Is bonus depreciation 100% in 2026?
Yes. The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025.
Can I take Section 179 on a used vehicle?
Yes, if it is new to your business, used more than 50% for business, and not purchased from a related party. Vehicle caps still apply.
What happens if my Section 179 deduction is more than my income?
The excess carries forward to future years. Bonus depreciation, by contrast, can create a loss.
Final Thoughts
The Section 179 deduction 2026 remains one of the most valuable tools for business owners who invest in equipment, vehicles and software. Pair it with bonus depreciation, track business use carefully, and plan purchases with your CPA before year-end.
Have questions about how this applies to your situation? Book a free consultation with Aric and get answers from a CPA.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
