Quick Answer

Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it is placed in service rather than depreciating it over 5–7 years. For 2024, the deduction limit is $1,220,000 with a phase-out beginning at $3,050,000 in total equipment purchases. Equipment financing qualifies — you can deduct the full purchase price even if you financed 90% of it and only paid 10% down. Bonus depreciation (80% in 2023, 60% in 2024, phasing down to 0% by 2027 under current law) can supplement Section 179 for additional deductions.

Tax Deduction Guide

Section 179 Equipment Deduction — Complete Guide

Section 179 is one of the most powerful tax tools available to equipment-buying businesses. Deduct the full cost of qualifying equipment in the year you buy it — even if you financed most of the purchase. This guide covers the 2024 limits, how financing interacts with Section 179, real-dollar tax savings examples, and how it compares to bonus depreciation and standard MACRS schedules.

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$1,220,0002024 Section 179 Limit
60%2024 Bonus Depreciation
$3,050,000Phase-Out Threshold
100%Deduction Even If Financed

Key Facts: Section 179 Equipment Deduction (2024)

2024 Deduction Limit$1,220,000
Phase-Out Starts At$3,050,000 total purchases
Bonus Depreciation 202460% (phasing to 0% by 2027)
Applies to Financed EquipmentYes — full deduction regardless of financing
Qualifying EquipmentMost business equipment, new or used
Business Software QualifiesYes — off-the-shelf software qualifies

Real-Dollar Examples

Section 179 Tax Savings by Equipment Purchase Size

The table below shows estimated tax savings using Section 179 at a 35% effective tax rate. Monthly payment estimates assume 60-month term at 7% APR. "Net Monthly After Tax" reflects effective monthly cost after accounting for the first-year tax savings spread across 12 months. Always work with a CPA for actual numbers specific to your tax situation.

Equipment PurchaseSection 179 DeductionTax Savings (35% rate)Monthly PaymentNet Monthly After Tax
$50,000 forklift$50,000$17,500$990/mo$648/mo
$100,000 CNC machine$100,000$35,000$1,981/mo$1,289/mo
$200,000 excavator$200,000$70,000$3,962/mo$2,576/mo
$300,000 tractor$300,000$105,000$5,943/mo$3,863/mo
$500,000 combine$500,000$175,000$9,905/mo$6,439/mo
$1,000,000 equipment$1,000,000$350,000$19,810/mo$12,877/mo

Monthly payments are estimates only. Tax savings are illustrative at 35% federal rate; actual savings depend on your tax bracket and state. Consult a CPA. For more on financing options see our how equipment financing works guide.

Depreciation Methods Compared

Section 179 vs. Bonus Depreciation vs. MACRS

Businesses have several options for deducting equipment costs. Section 179 is typically the best choice for most small and mid-sized businesses, but understanding the alternatives helps you and your CPA make the optimal decision for your tax situation.

MethodSection 179Bonus Depreciation 2024Bonus Depreciation 2025MACRS 5-yr PropertyMACRS 7-yr Property
2024 Limit$1,220,000UnlimitedUnlimitedUnlimitedUnlimited
Year 1 Deduction %100%60%40%20% yr114.3% yr1
Carry ForwardYes (if income limited)Yes (as NOL)Yes (as NOL)N/A — spread over termN/A — spread over term
Can Create NOL?No — limited to incomeYesYesNoNo
Best ForMost businesses, max yr1Large purchases, loss yearsDeclining benefitLow-income yearsMinimal planning
Used EquipmentYes (new to you)YesYesYesYes
Financed EquipmentYes — full deductionYesYesYesYes

Section 179 and bonus depreciation can be used together in the same tax year. Most businesses maximize Section 179 first, then apply bonus depreciation to any remaining qualifying purchases above the Section 179 limit. Speak with your CPA about the optimal combination for your specific situation.

Qualifying Categories

Equipment Categories That Qualify for Section 179

The following types of business equipment typically qualify for Section 179 deductions when placed in service during the tax year and used more than 50% for business purposes. This is not an exhaustive list — consult your CPA for your specific equipment.

🇺🇸 Business Use

Construction Equipment

Excavators, bulldozers, cranes, skid steers, wheel loaders, compactors, aerial lifts, and all heavy construction machinery. Must be used more than 50% for business.

🇺🇸 Business Use

Agricultural Equipment

Tractors, combines, planters, tillage equipment, grain handling equipment, irrigation systems, and most other farming machinery used in a trade or business.

🇺🇸 Business Use

CNC / Manufacturing

CNC machining centers, lathes, milling machines, laser cutters, injection molding machines, presses, and all production equipment placed in service in a manufacturing business.

🇺🇸 Business Use

Medical / Dental

MRI machines, CT scanners, X-ray equipment, dental chairs, dental imaging, surgical equipment, and all qualifying medical and dental equipment used in a healthcare practice.

🇺🇸 Business Use

Vehicles > 6,000 lb GVWR

Commercial vehicles with gross vehicle weight rating over 6,000 pounds — including work trucks, vans, and SUVs used primarily for business. SUVs are capped at $28,900 for Section 179 in 2024.

🇺🇸 Business Use

Computer / Software

Business computers, servers, networking equipment, and off-the-shelf business software all qualify. Custom software may qualify depending on how it was developed and placed in service.

🇺🇸 Business Use

Forklifts & Material Handling

Counterbalance forklifts, reach trucks, order pickers, pallet jacks, conveyor systems, and warehouse automation equipment all typically qualify for the full Section 179 deduction.

🇺🇸 Business Use

HVAC Systems

Commercial HVAC systems placed in service in non-residential property may qualify as qualified improvement property or as business equipment depending on how the installation is classified. Consult your CPA.

How Financing Interacts With Section 179

Financing Equipment and Taking Section 179

Many business owners don't realize that equipment financing does not reduce or eliminate the Section 179 deduction. When you finance equipment, the IRS treats you as the owner of the equipment from the moment it is placed in service — regardless of how much you have actually paid.

Example: You purchase a $300,000 excavator. You put 10% down ($30,000) and finance the remaining $270,000. In year one, you can take a Section 179 deduction of the full $300,000 purchase price, generating approximately $105,000 in tax savings at a 35% rate. Your actual out-of-pocket in year one was only $30,000 plus loan payments — but you received a tax benefit on the entire purchase price. This is one of the most compelling arguments for equipment financing over outright cash purchase in lower-cashflow years.

For more on how equipment financing works, see our complete equipment financing guide. To compare financing vs. leasing for tax purposes, see equipment financing vs. lease. For used equipment considerations, see new vs. used equipment financing.

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Common Questions

Section 179 Equipment Deduction — FAQ

What is the Section 179 deduction limit for 2024?
For tax year 2024, the Section 179 deduction limit is $1,220,000. This means a business can deduct up to $1,220,000 of qualifying equipment placed in service during the year in which it was purchased. The deduction begins to phase out dollar-for-dollar once total equipment purchases exceed $3,050,000 in a single tax year, and is completely eliminated at $4,270,000 in total purchases. These limits are indexed for inflation and typically increase modestly each year. Businesses that are close to the phase-out range should plan equipment purchases carefully — potentially spreading them across two tax years — and should confirm the current-year limits with their CPA well before year-end.
Can I use Section 179 if I financed the equipment?
Yes — and this is one of the most important things equipment buyers need to understand. Section 179 applies to the full purchase price of qualifying equipment regardless of how it was financed. If you purchase a $200,000 excavator with $20,000 down (10%) and finance $180,000, you can still deduct the full $200,000 in year one — generating approximately $70,000 in tax savings at a 35% effective tax rate. You receive the full tax benefit even though you only paid $20,000 out of pocket at closing. This makes financed equipment purchases extraordinarily tax-efficient for businesses that have sufficient taxable income to absorb the deduction. Equipment leases structured as capital (finance) leases also qualify; operating (true) leases do not.
What is the difference between Section 179 and bonus depreciation?
Section 179 and bonus depreciation are both accelerated depreciation tools, but they work differently. Section 179 has a cap ($1,220,000 in 2024) and cannot create a net operating loss — the deduction is limited to your taxable business income for the year. Bonus depreciation (60% in 2024, declining each year) has no dollar cap and can create a loss that carries forward to future tax years. For most small and mid-sized businesses, Section 179 is used first to maximize first-year deductions up to the income limit, and bonus depreciation picks up the remainder for large purchases. The two can be combined in the same tax year. Businesses with anticipated low-income years may benefit more from bonus depreciation's loss-carryforward flexibility. Always model both scenarios with your CPA before filing.
Does Section 179 apply to used equipment?
Yes. Since the Tax Cuts and Jobs Act of 2017, Section 179 applies to both new and used equipment. The key requirement is that the equipment must be new to your business — you cannot take Section 179 on equipment you previously owned or used. Used equipment purchased from a dealer, auction, another business, or a private party qualifies as long as it is placed in service in your business during the tax year. This is an important benefit for businesses that buy quality used construction equipment, agricultural machinery, or CNC equipment at significant discounts — the full Section 179 deduction applies to the actual purchase price paid, even if the original equipment cost much more. See our new vs. used equipment financing guide for more considerations.
What equipment qualifies for Section 179?
Most tangible personal property used in a business qualifies for Section 179. This includes excavators, bulldozers, cranes, CNC machines, tractors, combines, forklifts, medical and dental equipment, HVAC systems placed in qualifying property, commercial vehicles with GVWR over 6,000 pounds, computers, servers, and most off-the-shelf business software. Equipment must be used more than 50% for business purposes to qualify — if business use falls below 50%, you must switch to straight-line MACRS depreciation. Real property like buildings generally does not qualify, though certain qualified improvement property (interior renovations to non-residential buildings) may qualify. Vehicles with GVWR under 6,000 pounds are subject to luxury auto limits rather than full Section 179 treatment. Contact a CPA for specific guidance on your equipment type.
Can Section 179 reduce my taxes below zero?
No. Section 179 deductions are capped at your taxable business income for the year — you cannot use Section 179 to create a net operating loss. If your Section 179 deduction would exceed your taxable income, the excess is carried forward and can be deducted in future years when you have sufficient taxable income. This is an important planning point: if you anticipate a low-income year (perhaps due to a major project delay or seasonal business downturn), Section 179 may not be fully usable, and bonus depreciation — which can create an NOL that carries forward — might be preferable. For businesses with consistently strong income, Section 179 is almost always the right first choice due to its simplicity and immediate dollar-for-dollar tax reduction.
How does Section 179 interact with equipment leases?
The interaction between Section 179 and equipment leases depends entirely on the type of lease. Capital leases (also called finance leases), including those with a $1 buyout, a 10% purchase option, or other structures that transfer ownership to the lessee, are treated as purchases for tax purposes — the lessee can claim Section 179 on the full equipment value in the year of lease inception. Operating leases (also called true leases or FMV leases), where you return the equipment at the end of the term with no ownership transfer, do not qualify for Section 179 — you can only deduct the lease payments as ordinary business expenses spread over the lease term. For tax-focused equipment buyers, a loan or capital lease is almost always preferable to an operating lease. See our lease vs. loan equipment comparison for more detail.
When should I consult a CPA about Section 179?
Any business making equipment purchases of $25,000 or more should discuss Section 179 with a CPA or qualified tax advisor before finalizing the purchase — not after. Timing matters: equipment must be placed in service (operational and ready for use in the business) before December 31 of the tax year you want to take the deduction. For large purchases near year-end, delivery schedules, installation timelines, and lease vs. loan structuring can all affect eligibility. A CPA can also help you determine whether Section 179, bonus depreciation, or MACRS is most advantageous based on your income projections, state tax conformity (many states have their own Section 179 limits that differ from federal), and multi-year tax planning strategy. The tax savings available through proper planning frequently far exceed the cost of professional advice.

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Informational resource only. Not tax or legal advice. Consult a qualified CPA or tax advisor for guidance specific to your situation. Not an offer of credit or guarantee of approval.