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Tax Code

IRS Section 179

Section 179 is an IRS tax deduction that allows businesses to write off the full purchase price of qualifying equipment or software in the year it is acquired, even if the equipment is financed or leased. This immediate write-off is an alternative to traditional depreciation, where the cost is deducted over several years.

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How It Works For Financing

  • Immediate tax savings, spread-out payments: Section 179 allows you to deduct the entire cost of the equipment in the year you put it into service, regardless of whether you've paid off the loan.
  • Boosts cash flow: By financing the purchase, you avoid a large upfront expense while still getting the full tax savings immediately. The tax reduction can then help offset your monthly loan payments.
  • Applies to capital leases: This deduction is available for financed purchases and capital leases (rent-to-own agreements), but generally not for operating leases (rentals).

Key Limits For 2025

  • Deduction limit: For the 2025 tax year, the maximum amount a business can deduct is $2,500,000. This is a significant increase from previous years, implemented by the "One Big Beautiful Bill Act".
  • Bonus depreciation: For 2025, 100% bonus depreciation is also available and is often used in conjunction with Section 179 for larger purchases that exceed the Section 179 limit. Section 179 is typically applied first.
  • Claiming the deduction: To claim the deduction, you must place the equipment into service by December 31 of the tax year and file IRS Form 4562 with your tax return.