See what your equipment investment could mean at tax time.

Section 179 of the Internal Revenue Code generally allows a business to elect to deduct the cost of certain qualifying property in the year it is placed in service, rather than recovering that cost over several years through depreciation. Annual limits, a phaseout, and eligibility rules apply. IRS Publication 946 describes the concepts in full.

For tax year 2026, the maximum aggregate Section 179 election is $2,560,000 under the IRS inflation adjustments in Revenue Procedure 2025-32. That starting annual dollar limit may be reduced by the phaseout, the business-income limitation, and other rules.

The 2026 dollar limit begins to be reduced when the total cost of qualifying Section 179 property placed in service during the year exceeds $4,090,000. The reduction is dollar for dollar and the limit is not reduced below zero, which puts the full phaseout point at $6,650,000.

Used property may qualify if it is acquired by purchase for use in the active conduct of a trade or business and was not previously used by the taxpayer or acquired from a related party. Publication 946 sets out the acquisition requirements; a tax professional should confirm them for a specific purchase.

Whether equipment is paid for in cash or financed does not by itself determine Section 179 eligibility. What generally matters is that the property is acquired by purchase and placed in service during the tax year. Financing availability and terms are separate from tax eligibility.

Property is generally placed in service when it is ready and available for its intended use in the business, not when it is ordered, paid for, or financed. Delivery alone may not be enough if the equipment still requires installation or commissioning before it can be used.

Section 179 generally applies only to property used more than 50% in the active conduct of a trade or business, and the deduction is limited to the qualified business-use portion of cost. Listed-property and recapture rules may also apply if business use later drops.

The total Section 179 deduction for a year generally cannot exceed the taxpayer’s aggregate taxable income from the active conduct of any trade or business. An elected amount above that income may generally be carried forward, subject to the rules in Publication 946.

Section 179 is an election limited by an annual dollar cap, a phaseout, and taxable business income. Bonus depreciation, the special depreciation allowance, has different eligibility and election mechanics and is generally applied to basis remaining after any Section 179 election. This estimator models it only as an optional scenario.

Not necessarily. State treatment of Section 179 and bonus depreciation varies, and some states decouple from the federal limits. This estimator models federal rules only. Confirm state treatment with your tax professional.

No. The figure shown is the modeled deduction multiplied by the estimated tax rate you entered. It is not a calculated tax liability, a refund amount, or an amount payable to you.

The Section 179 election and the special depreciation allowance are generally reported on Form 4562, Depreciation and Amortization. See the IRS Instructions for Form 4562 and work with your tax professional.