What Is the Section 179 Deduction?

The Section 179 deduction lets a business deduct the full cost of qualifying equipment, vehicles and software in the year it's placed in service, instead of depreciating it over several years. For tax years beginning in 2026, the limit is $2,560,000, reduced dollar for dollar once total qualifying purchases exceed $4,090,000. Heavy SUVs are capped at $32,000.

How Section 179 works

Normally, when you buy a truck, an excavator or a jetter, you can't deduct the cost all at once. You recover it through depreciation over the asset's recovery period, usually five or seven years for contractor equipment. Section 179 is an election that lets you skip the wait and deduct some or all of the cost in the first year, on Form 4562.

It's an election, not an automatic rule. You choose which assets to expense and how much of each, up to the limits. Anything you don't expense is depreciated normally, or picked up by bonus depreciation.

What qualifies for Section 179?

• Tangible business equipment: tools, compressors, generators, jetters, lifts, skid steers, mini excavators, trailers, mowers, ladder racks, shelving and office equipment.
• Business vehicles: trucks, vans and SUVs, subject to the weight rules below.
• Off-the-shelf software you buy for the business.
• Qualified real property, if you elect it: qualified improvement property (interior improvements to nonresidential buildings) and roofs, HVAC, fire protection and alarm systems, and security systems added to nonresidential buildings after they were first placed in service.

Land, buildings themselves, property used outside the U.S., and property bought from a related person (spouse, parents, kids, or a company you control) don't qualify. Used equipment does qualify, as long as it's new to you.

Section 179 for trucks, vans and SUVs: the 6,000-lb rule

Vehicle weight decides how much you can write off. The number that matters is gross vehicle weight rating (GVWR), which is printed on the sticker inside the driver's door jamb, not the curb weight.

Run your own purchase through the Section 179 calculator. If you plan to use the standard mileage rate for a vehicle, note that you can't use it for a vehicle you've claimed Section 179 on.

The rules that limit Section 179

More than 50% business use

You can elect Section 179 on mixed-use property only if you use it more than 50% for business in the year you place it in service, and you can deduct only the business-use percentage of the cost. For vehicles, a contemporaneous mileage log is what proves that percentage.

Placed in service during the year

The asset must be ready and available for use in your business during the tax year. A truck ordered in December that arrives in January counts for next year, not this one.

The business income limit

Your Section 179 deduction can't be more than your taxable income from the active conduct of any trade or business during the year (figured before the Section 179 deduction and the half-SE-tax deduction, and including W-2 wages). Anything over that carries forward to future years. That's a key difference from bonus depreciation, which can create a loss.

Recapture if business use drops

If business use of the property falls to 50% or less in any year of its recovery period, you must add back part of the deduction as ordinary income on Form 4797. Selling the asset triggers depreciation recapture under the normal rules too.

Section 179 vs. bonus depreciation

Section 179 by trade

Common mistakes

• Buying a truck you don't need just for the deduction. A $60,000 write-off at a 24% bracket saves about $14,400 of income tax (plus some SE tax), not $60,000. You still spent the money.
• Guessing GVWR. Check the door-jamb sticker before you buy. A few hundred pounds can decide whether you're capped at $20,300 or not.
• No mileage log. Without records, the IRS can deny the business-use percentage, and with it the deduction.
• Forgetting state rules. Some states cap or don't allow federal Section 179 and bonus amounts. Check your state tax guide.
• Not planning for the sale. Expensing a truck now means the sale price is largely taxable when you trade it in later.

For year-end planning across all of your taxes, read the contractor taxes guide, or see how BRIX bookkeeping and tax help keeps the records your CPA needs.