What is the Section 179 deduction limit for 2026?

The Section 179 deduction limit is $1,220,000 for 2026. The phase-out begins when total equipment purchases exceed $3,050,000 — the deduction is reduced dollar-for-dollar above that threshold and is eliminated entirely at $4,270,000. These limits are adjusted annually for inflation.

What does Section 179 cover?

Section 179 covers tangible personal property used in business: machinery, equipment, computers, office furniture, business vehicles (subject to weight limits), and off-the-shelf software. It also covers qualified improvement property — improvements to the interior of non-residential commercial buildings. It does not cover land, buildings, or personal-use assets.

What is the difference between Section 179 and bonus depreciation in 2026?

Both let you deduct asset costs faster than standard depreciation. Section 179 is limited to your business income (you cannot create a loss), has a dollar cap ($1,220,000), and can be applied selectively to specific assets. Bonus depreciation in 2026 is 40% of the asset cost, has no income limitation, can create a loss, but applies to all qualifying assets equally. You can combine both in the same year.

Can Section 179 create a tax loss?

No. Section 179 deductions cannot exceed your business's taxable income for the year. If you do not have enough income, the unused deduction carries forward to the next tax year. Bonus depreciation, by contrast, can create or increase a net operating loss.

Do vehicles qualify for Section 179?

Yes, but with limits. Standard passenger vehicles (under 6,000 lbs GVWR) have a 2026 first-year deduction cap of approximately $12,200. Heavy SUVs and trucks over 6,000 lbs GVWR have a Section 179 cap of $30,500 in 2026. Vehicles over 6,000 lbs used more than 50% for business can also claim bonus depreciation on top of Section 179.

Can sole proprietors and self-employed people claim Section 179?

Yes. Section 179 is available to sole proprietors, LLCs, S corporations, C corporations, and partnerships. Sole proprietors claim it on Schedule C. The deduction cannot exceed your net self-employment income from the business for the year.

Section 179 Deduction 2026: Deduct Up to $1,220,000 on Business Equipment

Section 179 of the IRS tax code allows businesses to deduct the full cost of qualifying equipment and software in the year it is purchased, rather than spreading the deduction across five, seven, or fifteen years through standard depreciation. In 2026 the maximum deduction is $1,220,000. For a small business owner buying $30,000 of equipment, Section 179 can save thousands of dollars in taxes immediately rather than over the life of the asset.

2026 Section 179 Limits at a Glance

Item	2026 amount
Maximum deduction	$1,220,000
Phase-out starts at	$3,050,000 in total purchases
Phase-out complete at	$4,270,000
Bonus depreciation rate (2026)	40%
SUV Section 179 cap	$30,500
Passenger vehicle cap	~$12,200

Section 179 vs. Standard Depreciation: The Difference in Real Money

Without Section 179, a $50,000 piece of equipment would be depreciated over its useful life (typically 5 or 7 years for most business property under MACRS). With Section 179, you deduct it all in year one.

Worked Example: $50,000 CNC Machine

Approach	Year 1 deduction	Tax saved (24% bracket)
5-year MACRS (standard)	$10,000	$2,400
Section 179 (full expensing)	$50,000	$12,000

Section 179 puts $9,600 more cash in your pocket in year one — money you can reinvest immediately.

What Qualifies for Section 179

Eligible property:

Category	Examples
Machinery and equipment	Manufacturing equipment, HVAC, generators
Computers and technology	Laptops, servers, networking equipment
Office furniture and fixtures	Desks, chairs, filing cabinets
Business vehicles (subject to caps)	Trucks, vans, heavy SUVs over 6,000 lbs
Off-the-shelf software	Must be purchased, not custom-built
Qualified Improvement Property (QIP)	Interior improvements to commercial buildings
Security systems	Business alarm and camera systems

What does NOT qualify:

Land or the cost of buildings themselves
Inventory held for sale (raw materials, merchandise)
Assets used predominantly for personal purposes
Air conditioning and heating units for regular home use
Assets not placed in service during the tax year

Vehicle Limits Under Section 179

Vehicle deductions are capped based on the vehicle’s Gross Vehicle Weight Rating (GVWR):

Vehicle type	2026 Section 179 cap
Passenger car (under 6,000 lbs)	~$12,200
Heavy SUV or truck (6,001–14,000 lbs)	$30,500
Work vans and trucks (used exclusively for business)	Full cost up to $1,220,000
Delivery vans (no personal use, cargo only)	Full cost eligible

The 50% business use rule: Any vehicle claimed under Section 179 must be used more than 50% for business purposes. If business use drops below 50% in a later year, you may be required to recapture (pay back) a portion of the deduction.

Best candidates for full vehicle deduction: Box trucks, cargo vans with no rear windows, vehicles with a manufacturer’s GVWR over 6,000 lbs used exclusively for business.

Section 179 + Bonus Depreciation: How They Stack

In 2026, bonus depreciation is 40% (down from 60% in 2024 — it steps down 20% per year from 100% in 2022). You can combine Section 179 and bonus depreciation on the same purchase:

Example: $100,000 Equipment Purchase

Step	Amount
Section 179 (full immediate deduction)	$100,000
Bonus depreciation	$0 (nothing left after Section 179)
Total year-1 deduction	$100,000

If Section 179 is limited by your income cap, bonus depreciation picks up the remainder:

Step	Amount
Section 179 (limited by income)	$40,000
Remaining basis	$60,000
Bonus depreciation at 40%	$24,000
Standard MACRS on remaining $36,000	~$7,200 (first year)
Total year-1 deduction	~$71,200

The Income Limitation

Section 179 cannot exceed your taxable income from active business activities. You cannot use it to create a loss. Unused deductions carry forward indefinitely to future years.

This income cap is why many businesses combine Section 179 with bonus depreciation — bonus depreciation has no income cap and can generate a net operating loss (NOL) that carries forward to reduce future years’ taxes.

Qualified Improvement Property (QIP)

Qualified Improvement Property — improvements to the interior of non-residential commercial buildings — became 15-year property in 2017 and qualifies for Section 179 and 100% bonus depreciation (now stepping down). This means a restaurant that renovates its kitchen, an office that installs new flooring, or a retail store that upgrades its interior can deduct those costs in year one rather than over 39 years.

How to Claim Section 179

Complete IRS Form 4562 (Depreciation and Amortization). Part I covers Section 179 elections.
Make the election on your return by the due date (including extensions). You can generally make or revoke a Section 179 election on an amended return.
List each qualifying asset with its description, date placed in service, cost, and the amount elected under Section 179.
Claim on your business return: Schedule C (sole proprietors), Form 1065 (partnerships), Form 1120-S (S corporations), or Form 1120 (C corporations).

Section 179 for Software and Tech

Off-the-shelf software purchased (not licensed or subscribed to) qualifies for Section 179. This includes:

Purchased desktop software (accounting, design, CAD)
Point-of-sale systems
Enterprise software with a one-time purchase license

Does NOT qualify: SaaS subscriptions, cloud-based software you access but do not own.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy