2025 Section 179 Deduction

What Is Section 179 (and Why Does It Matter in 2025)?

Section 179 of the Internal Revenue Code empowers businesses to deduct the full purchase price of qualifying equipment and software in the same tax year they’re put into service. Instead of stretching depreciation across several years, you can claim the entire cost upfront—dramatically improving your cash flow and creating immediate tax benefits.

Why Section 179 Matters for Your Business

• Immediate Tax Impact: Rather than waiting years for depreciation benefits, claim the full deduction in 2025
• Enhanced Cash Flow: Keep more working capital in your business when you need it most
• Strategic Growth: Upgrade equipment sooner and maintain competitive advantages in your market

How the 2025 Deduction Limits and Phase‐Out Threshold Work

What Is the Maximum Section 179 Deduction for 2025?

For 2025, businesses can deduct up to $1,250,000 in qualifying purchases. This represents the total amount you can write off immediately, provided your equipment meets these key criteria:

• Placed in service during the 2025 tax year
• Used for business purposes more than 50% of the time
• Qualifies under IRS guidelines

Spending Cap and Phase-Out Rules

The Section 179 deduction begins to phase out when your equipment purchases exceed $3,130,000:

• Dollar-for-dollar reduction above $3,130,000
• Complete phase-out at $4,380,000
• Additional purchases may still qualify for bonus depreciation

How Does Section 179 Apply to Business Vehicles?

Special rules apply to vehicles:

• Vehicles rated at 6,000 lbs. GVWR or less follow standard depreciation rules
• SUVs over 6,000 lbs. GVWR but under 14,000 lbs. GVWR: Limited to $31,300 Section 179 deduction
• Vehicles over 6,000 lbs. GVWR such as heavy work trucks and vans may be eligible for full Section 179 expensing
• Vehicles with beds at least six feet long are not subject to the SUV limitation

How Do Carryover & Limitations Work?

Your Section 179 deduction cannot exceed your business’s net taxable income. However, if your Section 179 election exceeds your taxable business income in a given year, you can choose a partial Section 179 election. Any unused portion of the deduction carries forward to subsequent tax years, allowing you to apply it once you have sufficient income. This means if you can’t fully utilize Section 179 in the current year, you retain the remaining deduction for future use—ensuring you never lose the benefit.

Example: How Does Section 179 Generate Tax Savings?

This example illustrates how Section 179 can dramatically reduce your after-tax equipment costs. For a $1,300,000 purchase:

• Section 179 Deduction: $1,250,000
• Bonus Depreciation: $20,000
• Total Tax Savings: $444,500 (at 35% tax bracket)
• Final Equipment Cost: $855,500