For small business owners and contractors who bought equipment this year and want to know how much they can write off immediately.
Section 179 lets you deduct up to $1,220,000 of business equipment costs in 2026 in the year of purchase instead of spreading the deduction over several years. You must use the equipment more than 50% for business, and your deduction cannot exceed your net business income for the year.
Section 179 is one of the most valuable tax tools available to small business owners. Instead of depreciating a new piece of equipment over 5 or 7 years, you write off the full cost in year one. A $60,000 work van, a $25,000 CNC machine, or $8,000 worth of computers can all be fully expensed if they qualify.
The 2026 deduction limit is $1,220,000. If your total qualifying equipment purchases exceed $3,050,000, the deduction begins to phase out dollar-for-dollar and disappears entirely once purchases reach $4,270,000. Most small and mid-size businesses fall well below the phase-out, so the limit is effectively the full cost of whatever you bought.
Section 179 cannot create a tax loss. If your deduction would push your net income below zero, the unused amount carries forward to the next year automatically. This is the key difference from bonus depreciation, which in 2026 covers 40% of eligible costs and can produce a net operating loss if that is useful for your situation.
An asset is placed in service when it is ready and available for its intended business use, not when it is ordered or paid for. A $40,000 piece of equipment ordered in November but delivered and installed in January of the following year is deductible in the year it is installed, not the year it was purchased.
| Asset type | 2026 limit | Notes |
|---|---|---|
| General equipment and machinery | $1,220,000 | Full cost if under phase-out threshold |
| Off-the-shelf software | $1,220,000 | Must not be custom-developed |
| SUVs over 6,000 lbs GVWR | $28,900 | Special cap applies to SUV category only |
| Heavy trucks and vans over 6,000 lbs | $1,220,000 | No special cap, full business use required |
| Qualified building improvements | $1,220,000 | Roofs, HVAC, fire alarms, security systems |
See exactly how much Section 179 saves you this year
Use the Free Section 179 Calculator →The limit is $1,220,000 for tax years beginning in 2026. The phase-out starts at $3,050,000 in total qualifying purchases. Once purchases exceed $4,270,000, no deduction is available and bonus depreciation must be used instead.
Tangible personal property used in business qualifies: machinery, tools, computers, office furniture, and vehicles. Off-the-shelf software qualifies. Specific non-residential building improvements (roofs, HVAC, alarms, security systems) also qualify. The building itself and land do not qualify.
Yes. Trucks and vans with a gross vehicle weight rating over 6,000 lbs used more than 50% for business qualify for the full deduction up to $1,220,000. SUVs in this weight class have a separate $28,900 cap. Passenger cars have much lower annual limits around $12,400.
No. Self-employment tax is calculated on your net business profit before the Section 179 deduction on Schedule C. The deduction reduces your ordinary income tax only. To reduce SE tax, you would need to elect S-Corp status, which changes the structure of how income is classified.
Section 179 is property-by-property, capped at net income, and fully elected by the business. Bonus depreciation in 2026 is 40% of eligible costs, applies automatically unless you opt out, and can create a net operating loss. Most businesses use Section 179 first, then bonus depreciation for remaining costs.
Yes. Used equipment placed in service in 2026 qualifies as long as it is new to your business and meets the more-than-50%-business-use requirement. There is no requirement that the equipment be new to the world, only new to you. Keep your purchase invoice to document the date placed in service.
The excess amount carries forward to the following tax year. You cannot claim more than your net taxable business income in the current year. The carryforward is not limited in time and offsets income in future years when your business is more profitable.
File IRS Form 4562, Part I. List each piece of elected property, its cost, the business-use percentage, and the elected deduction. The total flows to Schedule C (sole proprietors), Form 1120-S (S-corps), or Form 1065 (partnerships). Tax software walks through this automatically in the asset section.
No. Section 179 is an election, not a requirement. Some businesses choose regular depreciation or bonus depreciation instead, depending on their income situation. If you expect much higher income in future years, stretching the deduction over time may reduce taxes more overall. Talk to a CPA about timing.
This content is for informational purposes only and does not constitute financial, legal, or tax advice. Tax rules change annually. Consult a qualified tax professional for guidance specific to your situation and the current tax year.