Section 179 Deduction Calculator
Calculate maximum Section 179 deductions, bonus depreciation, luxury auto limits, and total tax savings for business equipment purchases. Includes 2026 limits and phase-out rules.
Why This Matters for Your Finances
Why: Section 179 lets businesses deduct the full cost of qualifying equipment in year one instead of depreciating over years. Knowing your deduction and tax savings helps with cash flow and planning.
How: Maximum deduction = min(equipment cost, $1.2M). Phase-out reduces this when total purchases exceed $3.13M. Taxable income limits apply. Bonus depreciation (60%) applies to remaining basis.
- โ2026 Section 179 limit is $1.2 million; phase-out begins at $3.13 million.
- โSUVs and trucks over 6,000 lbs have a $30,000 first-year cap.
- โSection 179 cannot exceed your business taxable income.
๐ Sample Scenarios โ Click to Load
Equipment Information
Tax Information
Depreciation Options
First-Year Deduction Breakdown
Section 179, Bonus Depreciation, and First-Year MACRS
Tax Savings
Phase-Out Curve
๐ Step-by-step Calculation
โ ๏ธFor educational purposes only โ not financial advice. Consult a qualified advisor before making decisions.
๐ก Money Facts
Section 179 limit for 2026 is $1.2 million; phase-out begins at $3.13 million.
Luxury auto limits: $30K for SUVs/trucks over 6,000 lbs, $12K for passenger cars.
Bonus depreciation is 60% for 2026, down from 100% in prior years.
Section 179 cannot exceed business taxable income; excess carries forward.
๐ Key Takeaways
- โข Section 179 lets you deduct the full cost of qualifying equipment in year oneโ2026 limit is $1,200,000, phase-out begins at $3,130,000 total purchases.
- โข Taxable income capโyour Section 179 deduction cannot exceed your business taxable income; excess carries forward.
- โข Luxury auto limitsโSUVs/trucks over 6,000 lbs: $30,000; passenger cars: $12,000; heavy equipment: no limit.
- โข Bonus depreciation (60% for 2026) applies to remaining basis after Section 179; combine with MACRS for maximum first-year deductions.
๐ก Did You Know?
Section 179 was created to encourage small business investment. Over 99% of US businesses qualify.
โ IRS.gov
SUVs and trucks over 6,000 lbs GVWR get a $30,000 Section 179 capโmany full-size pickups qualify.
โ IRS Rev. Proc.
Bonus depreciation phases down: 80% (2023), 60% (2024), 40% (2025), 20% (2026), 0% (2027+).
โ TCJA sunset provisions
Software and off-the-shelf computer equipment qualify for Section 179 if used more than 50% for business.
โ IRC Section 179(d)
Used equipment qualifies for Section 179 if purchased from an unrelated party and placed in service during the tax year.
โ IRS Publication 946
Equipment must be placed in service (ready for use) by Dec 31 to claim Section 179 for that tax year.
โ IRC Section 179
๐ How Section 179 Works
Section 179 of the Internal Revenue Code allows businesses to deduct the full purchase price of qualifying equipment and software in the year placed in service. The calculation applies several limits in sequence: (1) maximum deduction cap ($1,200,000 for 2026), (2) phase-out when total purchases exceed $3,130,000, (3) taxable income limitation, and (4) luxury auto caps for vehicles. Remaining basis after Section 179 is eligible for 60% bonus depreciation (2026), then MACRS.
Maximum Deduction Limit
2026 limit: $1,200,000. Phase-out reduces this dollar-for-dollar when total Section 179 purchases exceed $3,130,000.
Taxable Income Cap
Section 179 cannot exceed business taxable income. Excess carries forward to future years.
๐ฏ Expert Tips
โ๏ธ Section 179 vs. Bonus vs. MACRS
| Method | 2026 Limit | Income Limit? |
|---|---|---|
| Section 179 | $1.2M (phase-out at $3.13M) | Yes |
| Bonus Depreciation | 60% of remaining basis | No |
| MACRS | Standard depreciation schedule | No |
โ FAQ
What qualifies for Section 179?
Tangible personal property used for business: machinery, equipment, vehicles (subject to caps), computers, software, furniture. Must be used more than 50% for business. Real property (buildings) does not qualify.
Can I use Section 179 on used equipment?
Yes. Used equipment qualifies if purchased from an unrelated party and placed in service during the tax year. The 2026 limit and phase-out still apply.
What happens if my Section 179 exceeds taxable income?
The excess carries forward to future years. You can deduct it when you have sufficient taxable income. Bonus depreciation has no income limit.
Do luxury auto limits apply to all vehicles?
SUVs and trucks over 6,000 lbs GVWR: $30,000 cap. Passenger cars: $12,000 cap. Heavy equipment (e.g., construction vehicles) may have no special limit.
How does the phase-out work?
When total Section 179 purchases exceed $3,130,000 (2026), your maximum deduction is reduced dollar-for-dollar. At $4,330,000, the deduction is fully phased out.
Can I elect out of bonus depreciation?
Yes. You can elect out of bonus depreciation for a class of property. Some businesses do this to smooth depreciation or for state tax reasons.
Does my state follow federal Section 179?
Many states conform to federal Section 179, but some have different limits or do not allow it. Check your state tax rules.
๐ Official Sources
โ ๏ธ Disclaimer
This calculator provides estimates only. Section 179 limits and rules change annually. State tax treatment may differ. Always consult a qualified tax professional for your specific situation.