Can I finance equipment and still take the Section 179 deduction?

How Section 179 and financing work together

Section 179 of the IRS code lets a business deduct the full cost of qualifying equipment in the year it's placed in service, rather than depreciating it over years. Financing the equipment doesn't reduce the deduction — you can deduct the full purchase price even though you spread the payments out. The deduction is tied to placing the asset in service, not to how you paid for it.

Why year-end timing matters

To claim Section 179 for a given tax year, the equipment must be purchased and placed in service by December 31 of that year. That makes Q4 a common time to finance equipment: businesses lock in the deduction for the current year while preserving cash by paying over the financing term.

Financing options for the equipment

• Equipment financing — the equipment itself serves as collateral, which often means easier approval and competitive rates
• Term loan — a fixed-payoff option when you're buying multiple assets or combining equipment with other needs; run the payment schedule through the business loan amortization calculator before comparing terms

The current dollar limits are worth knowing before you plan a Q4 purchase around them: for tax years beginning in 2026, IRS Publication 946 sets the maximum Section 179 deduction at $2,560,000, phased out dollar-for-dollar once total qualifying equipment purchases for the year exceed $4,090,000. Almost every financed small-business equipment or vehicle purchase falls well under both thresholds — the phase-out mainly bites larger, capital-intensive operations buying multiple big-ticket assets in the same year. Run your specific purchase through the Section 179 vs. bonus depreciation calculator to see which deduction path nets more this tax year. It's also a genuinely common purchase reason: 26% of financing applicants nationally cite making repairs or replacing capital assets — the closest reported category to equipment purchases — as their reason for seeking financing, per the Federal Reserve's Small Business Credit Survey — the least-cited of the five reasons tracked (behind operating expenses at 56%, expansion at 46%, available credit for future use at 42%, and refinancing at 28%). The SBA channel that backs a share of that demand ran at record volume too: the agency guaranteed 77,600 loans through 7(a) nationwide in fiscal year 2025.