Section 179 deduction guide 2025: Limits, qualifications, and examples

Section 179 deductions offer entrepreneurs helpful tax deductions to reduce their overall taxable business income. In 2025, businesses may be able to write off up to $2.5 million in qualifying equipment purchases. Read on to learn what IRS Section 179 is, Section 179 tax benefits, how to calculate Section 179 amounts, and how the One Big Beautiful Bill Act (OBBBA) changed Section 179 limits. Whether you’re purchasing machinery, vehicles, software, or office equipment, understanding Section 179 limits, guidelines, and qualifying property may save your business at tax time.

What is a Section 179 deduction?

First, let’s answer, “What is Section 179?” Section 179 of the Internal Revenue Code (IRC) allows eligible businesses to immediately deduct the cost of qualifying purchases such as machinery and equipment. All businesses need equipment: technology, office furniture, supplies, vehicles, machinery, or other tangible items.

Your business could purchase any number of these items throughout the year and may do so repeatedly. IRS Section 179 allows you to elect to deduct the cost of these items, lowering your business’ federal taxable income.

2025 Section 179 changes: New $2.5M limit

In 2025, the One Big Beautiful Bill Act brought several changes to small business taxes, including the most significant expansion to the Section 179 deduction in recent years. The following aspects were impacted:

• The 2025 Section 179 deduction limit was raised to $2.5 million dollars
• The 2025 Section 179 phase-out threshold increased to $4 million dollars
• Effective for qualifying property placed into service AFTER January 1, 2025.

Before the OB3 legislation was enacted, the 2024 inflation adjusted limits were $1.22 Million for the deduction, phasing out at $3.05 Million. As you can see, The Big Beautiful Bill elevated the Section 179 thresholds significantly. Before the most recent update, Section 179 last saw notable changes after 2017’s tax reform. At that time, the Section 179 deduction and phaseout limits also increased, and the types of property eligible were also impacted.

Read on to find out how Section 179 expensing works today.

Who qualifies for Section 179 deductions?

All business types (structures) continue to be generally eligible for IRC Section 179 expensing, including:

• Corporations
• LLCs
• Partnerships
• Sole proprietorships

Section 179 qualifying property: equipment, vehicles, and more

Tangible personal property purchased for business purposes generally qualifies for the Section 179 deduction. Certain improvements to nonresidential real property, such as roofs and systems for heating, air conditioning, security, and fire protection, also qualify as eligible under Section 179 guidelines.

Most types of business equipment your business purchases and places in service during the tax year could qualify for the Section 179 write-off.

 Items include:

• Equipment and machinery
• Business vehicles (but the deduction may be limited – see below)
• Computers
• Off-the-shelf computer software
• Office furniture and equipment
• Costs of certain improvements to business buildings
• Certain agricultural and storage structures

Section 179 business income limitations

The total amount you can deduct under Section 179 is subject to a dollar limit and a business income limit, each of which applies to the individual owner, not the business entity. Section 179 business income limitations are as follows:

• The maximum deduction for Section 179 for 2025 (taxes filed in 2026) is $2,500,000 of expenditures.
• The beginning phaseout starts at $4,000,000. These amounts adjust for inflation each year.
• Only certain types of property may be deducted. For example, qualifying tangible property, computer software, real property, vehicles, equipment, etc.

How to calculate Section 179 limits

The Section 179 deduction reduces dollar-for-dollar for qualified expenditures beyond the beginning phaseout. For example, let’s calculate the Section 179 tax write-off for a business making qualifying purchases of $4.5 million. First, subtract the phaseout amount from the qualifying purchase amount. That is $4.5 million – $4 million, or $500,000. Then, subtract that value from the maximum deduction. That is $2.5 million – $500,000. Therefore, the Section 179 amount would be $2 million in this case.

The simplified formula is:

• (Section 179 maximum deduction – (Qualifying purchases – Phaseout amount)) = Section 179 write-off
• ($2.5M – ($4.5M – $4M)) = $2 Million

Here are a few additional rules:

1. The amount of taxable income from an active trade or business limits the Section 179 deduction. Any unused deduction may be carried over for an unlimited number of years.
2. The deduction is pro-rated if business use is less than 100%.
3. The write-off is not allowed if business use is 50% or less.
4. Vehicle expense deductions, including the Section 179 deduction, have separate limitations for the maximum amount of depreciation you can take. The overall limitation is based on these factors:

• If the vehicle is a car, truck, or van
• If you have chosen to take special or bonus depreciation
• The gross vehicle weight (read more about using Section 179 for work vehicles)
• If the vehicle is bought or held for leasing by a business engaged in leasing passenger automobiles

After the first year, the balance of the qualifying vehicle’s cost depreciates at a different rate.

How to claim a Section 179 expense: Form 4562 instructions

Here’s the process for taking the Section 179 deduction:

1. Purchase qualified property and start using it during the tax year.
2. Substantiate the financial records of each purchase, including the following:

• Date of purchase
• The date you began using the property
• Associated costs of the purchase. Your tax pro can help identify all qualifying property.

Use IRS Form 4562, Depreciation and Amortization, to calculate and claim a Section 179 deduction. Need help? Consult a Block Advisors certified small business tax pro to help you complete your small business tax return and determine if you qualify for a Section 179 deduction.

Section 179 vs. Bonus depreciation: Which to use?

Choosing between Section 179 expensing and bonus depreciation often comes down to how much flexibility you want and how your business’s income looks for the year. Section 179 deductions provide a good amount of control — you pick and choose which assets to expense and how much to deduct, making it useful if you want to manage taxable income carefully. Bonus depreciation is more all‑or‑nothing: if you use it for an asset, you generally must apply it to all assets in that same class.

Another key difference is that Section 179 write-offs can’t create a loss, while bonus depreciation can. That means businesses with lower income may lean on bonus depreciation to maximize deductions, while those with steadier profits might prefer the precision of Section 179. In many cases, businesses choose to use a blend of both methods to get the best tax outcome. A Block Advisors Small Business Certified Tax Pro can help you understand both paths and decide the best route to take to maximize your small business tax filing results.

Get help with small business taxes

For a customized tax strategy, including how to maximize self-employed or small business tax deductions, turn to your Block Advisors certified small business tax pro. Get peace of mind with our 100% accuracy guarantee. 

As your partner in small business, Block Advisors also offers bookkeeping, payroll, and business formation services. We’re here to help year-round so you can focus on your small business dream.

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This article is for informational purposes only. The content may not constitute the most up-to-date information and should not be construed as legal advice.