Tax depreciation · Guide

Section 179 deduction: limits for 2025 and 2026, and when to use it

Published Oct 24, 2026 By Smart Accounting

The Section 179 deductionSection 179 deduction. An election to deduct all or part of the cost of qualifying property in the year it is placed in service, up to an annual dollar limit and your business income. Glossary is an election: instead of recovering an asset’s cost over its recovery periodRecovery period. The number of years over which an asset's basis is deducted under MACRS, for example 5 years for computers and cars or 27.5 years for residential rental buildings. Glossary, you deduct some or all of it in the year you place it in servicePlaced in service. When an asset is ready and available for its specific use in your business or rental activity. Depreciation starts then, not on the purchase date. Glossary. You make the election on Form 4562, Part I [Form 4562 instr.].

What are the Section 179 limits for 2025 and 2026?

The 2025 figures are in Publication 946 [Pub 946, What's New]; the 2026 figures come from Rev. Proc. 2025-32 [Rev. Proc. 2025-32, §3.24]. The reduction is dollar for dollar: Publication 946’s example places $4,050,000 of machinery in service in 2025, so the limit falls by $50,000 to $2,450,000. At $6,500,000 or more of §179 property in 2025, the deduction disappears entirely [Pub 946, ch. 2].

These limits apply per taxpayer, not per business. Married couples filing separately share one limit and split it equally unless they both elect otherwise [Pub 946, ch. 2].

What property qualifies?

The property must be eligible, acquired by purchase for use in your business, and not on the excluded list [Pub 946, ch. 2]. Eligible property includes:

• Tangible personal property: machinery and equipment, office equipment, signs, store counters, and other property attached to a building that is not a structural component.
• Off-the-shelf computer software available to the general public under a nonexclusive license.
• Qualified section 179 real property, if you elect it: qualified improvement property (interior improvements to a nonresidential building) and roofs, HVAC, fire protection and alarm systems, and security systems added to nonresidential real property after it was first placed in service.

Excluded: land and land improvements such as paved parking areas, swimming pools, docks, bridges and fences; property acquired from a related person, by gift or by inheritance; property used predominantly outside the United States; and, for non-corporate owners, most property leased to others [Pub 946, ch. 2].

The business income limit

After the dollar limit, the deduction is capped at your taxable income from the active conduct of any trade or business during the year, figured without the §179 deduction itself, the deduction for half of self-employment tax, or net operating loss deductions. Wages you earned as an employee count toward this income [Form 4562 instr., line 11]. Anything you elect but cannot deduct carries forward on line 13 of Form 4562 [Pub 946, ch. 2].

Vehicles and the SUV cap

For an SUV rated over 6,000 and up to 14,000 pounds gross vehicle weight, you cannot expense more than $31,300 (2025) or $32,000 (2026) under §179. Vehicles with a cargo bed of at least 6 feet that is not readily accessible from the passenger compartment, vehicles seating more than nine behind the driver, and certain fully enclosed vans with no seating behind the driver are exempt from that cap [Form 4562 instr., column (i)]. Cars, trucks and vans rated 6,000 pounds or less are passenger automobiles: §179, bonus and regular depreciation together are capped each year [Pub 946, ch. 5]. The calculator applies those limits.

Section 179 or bonus depreciation?

For property acquired after January 19, 2025, bonus depreciation is 100% unless you elect a lower rate or elect out [Notice 2026-11]. Section 179 is applied first, then bonus on what remains [Form 4562 instr., line 14]. So for most equipment the default result is the same: the whole cost in year one. The differences:

• §179 is chosen asset by asset and amount by amount. Bonus is all-or-nothing per property class (you elect out for a whole class).
• §179 is limited by business income. Publication 946 sets no such income limit for bonus depreciation.
• §179 requires more than 50% business use and an active trade or business; bonus depreciation requires qualified property (MACRS recovery period of 20 years or less, among other categories) [Pub 946, ch. 3].

Worked example: a $120,000 machine placed in service in March 2026

Seven-year property, 100% business use, acquired after January 19, 2025. Year-one deductions, from the calculator:

The middle row is how you would size a deduction to a particular income level: $50,000 of §179 plus 14.29% of the remaining $70,000 (Table A-1, 7-year, half-year convention) [Pub 946, App. A, Table A-1]. Whether spreading the deduction is better depends on your tax brackets in each year, which this site cannot judge for you.

If business use drops later

If you claim §179 and the property’s business use falls to 50% or less in a later year of its recovery period, you must recapture part of the deduction as income on Form 4797 [Form 4562 instr., column (i)]. See depreciation recapture.