Section 179 Expensing: Write Off Equipment in Year One
Section 179 lets you deduct the full cost of qualifying equipment, software, and property improvements in the year purchased — instead of depreciating it over 5–39 years. The 2025 limit is $2.5 million, raised by the One Big Beautiful Bill Act.
What Section 179 Does
Under IRC §179, businesses can elect to expense (immediately deduct) the cost of qualifying property placed in service during the year — rather than recovering the cost through depreciation over the asset's useful life. A $50,000 piece of equipment that would normally generate $10,000/year in depreciation deductions instead generates a $50,000 deduction in year one.
2025 Limits and Phase-Out
- Maximum deduction: $2,500,000 (raised from $1,160,000 by OBBBA)
- Phase-out threshold: $4,000,000 — the deduction reduces dollar-for-dollar above this total property cost
- Phase-out elimination: $6,500,000 — at this total, the Section 179 deduction is completely phased out
- Taxable income limitation: The deduction cannot exceed taxable income from all business activities (not just the one purchasing the property)
The taxable income limitation is critical: if your business has $40,000 of taxable income before the Section 179 deduction, you can only deduct up to $40,000 under §179. The excess carries forward to the next year — it is not lost.
What Qualifies for Section 179
- Tangible personal property: Equipment, machinery, computers, furniture, fixtures — used more than 50% for business
- Off-the-shelf software: Business software purchased or financed (not custom-developed)
- Qualified improvement property: Improvements to the interior of nonresidential real property (HVAC, fire protection, security systems, roofs) placed in service after the building was placed in service
- Vehicles: Subject to special luxury auto limits — heavy SUVs (GVWR > 6,000 lbs) are capped at $31,300 under §179 for 2025; regular passenger vehicles have their own lower caps
- Does NOT qualify: Land, inventory, property held for sale, property used outside the US, property acquired from a related party
Section 179 vs. Bonus Depreciation: Key Differences
Both allow accelerated deductions — but they work differently and have different strategic uses:
- Section 179 — selective: You choose which assets to expense and how much. Can be used on some assets but not others in the same year. Cannot create a net operating loss — capped at taxable income.
- Bonus depreciation — automatic (unless you opt out): Applies to all qualifying assets unless you elect out. CAN create a net operating loss — no taxable income limitation. Phasing down: 40% for 2025 (was 80% in 2023, 60% in 2024).
- Strategy: Use Section 179 first to deduct down to zero taxable income, then use remaining bonus depreciation if a net operating loss is acceptable (or carry forward the 179 excess)
Bonus depreciation phased down under the TCJA schedule (100% through 2022, then 80%/60%/40%). Section 179, by contrast, is set by statute and indexed for inflation annually — and the One Big Beautiful Bill Act (OBBBA, 2025) raised its cap to $2.5 million with a $4 million phase-out threshold (from $1.16M / $2.89M).
IRC §179 (election to expense certain depreciable business assets), IRC §168(k) (bonus depreciation), IRC §179(b)(2) (taxable income limitation), IRC §280F (luxury auto limits). IRS Publication 946 (How to Depreciate Property), OBBBA P.L. 119-21 + Rev. Proc. 2025-32 (2025 §179 limits).
Genie models your Section 179 vs. bonus depreciation strategy based on current-year taxable income and tells you the exact deduction to take — and whether a net operating loss is beneficial.
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