Section 179 lets businesses deduct the full purchase price of qualifying equipment or software in the year of purchase — up to $1,160,000 in 2024 — instead of spreading the cost over years of depreciation.
Section 179 of the IRS tax code allows small and mid-size businesses to immediately expense the full cost of qualifying property rather than depreciating it over its useful life under MACRS. For tax year 2024, the deduction limit is $1,160,000, with a phase-out beginning at $2,890,000 of qualifying purchases. The deduction cannot exceed taxable income — it cannot create a net operating loss, though the unused portion can carry forward. Qualifying property includes new or used tangible business equipment (machinery, vehicles, computers, office furniture), off-the-shelf software, and qualified improvement property placed in service during the tax year. The property must be used more than 50% for business purposes. Passenger vehicles have separate, lower limits under Section 179 — the IRS lists annual caps in Publication 946. For equipment-financing decisions, Section 179 is a significant factor. Financing $100,000 in equipment may deliver a $100,000 deduction that offsets taxable income at your marginal rate — potentially recovering 21-37% of the equipment cost via tax savings in year one. This is why the ClearValue team encourages clients to bring their CPA into equipment-financing conversations before year-end.
If you purchase equipment (or finance it under a capital/finance lease that transfers ownership), Section 179 applies. True operating leases do not qualify because you do not own the asset. Confirm with your CPA before finalizing lease vs. purchase structure.
No. The Section 179 deduction is limited to your business's taxable income for the year. Any unused deduction carries forward to future tax years. Bonus depreciation does not have this limitation and can create a loss.
For tax year 2024, the maximum deduction is $1,160,000. The phase-out begins when total qualifying property placed in service exceeds $2,890,000. These limits adjust annually for inflation. See IRS Publication 946 for current limits.
Section 179 is applied first, then bonus depreciation applies to any remaining basis. Businesses often use both together to maximize first-year deductions on large capital purchases. Unlike Section 179, bonus depreciation can create a loss and may be subject to recapture rules.