Section 179 Deduction Limits for 2026: Caps, Phase-Outs & How They Work
Section 179 of the Internal Revenue Code lets businesses deduct the full cost of qualifying equipment in the year it is placed in service, instead of depreciating it over several years. But the deduction has guardrails: an annual expensing cap, a phase-out threshold for big spenders, and a taxable-income limitation. Here is how the 2026 limits work.
2026 Section 179 limits at a glance
| Limit | 2026 amount |
|---|---|
| Maximum Section 179 expensing | $2,560,000 |
| Phase-out threshold (total equipment placed in service) | $4,090,000 |
| Heavy SUV Section 179 cap | $32,000 (see heavy SUV rules) |
These figures are inflation-adjusted every year. Confirm the current-year numbers in the IRS Revenue Procedure or with your CPA before filing.
How the phase-out works
If your business places more than $4,090,000 of qualifying equipment in service during the year, the $2,560,000 allowance shrinks dollar-for-dollar. For example, a company that places $4,290,000 in service ($200,000 over the threshold) sees its Section 179 cap reduced to $2,360,000.
The good news: equipment basis that exceeds the Section 179 cap is not lost. It can still be written off in Year 1 with 100% bonus depreciation, which Congress made permanent under the One Big Beautiful Bill Act for qualifying property acquired and placed in service after January 19, 2025. Our equipment calculator models this automatically.
The taxable income limitation
Section 179 cannot exceed your business's taxable income for the year, and it cannot create a loss. Unused Section 179 amounts carry forward to future years. Bonus depreciation has no such limit — it can create a net operating loss — which is one reason businesses sometimes prefer it. See bonus depreciation vs. Section 179 for a full comparison.
What qualifies
- New and used equipment, as long as it is new to your business
- Machinery, computers, office furniture, and off-the-shelf software
- Business vehicles (special weight-based rules apply — see our GVWR guide)
- Must be purchased and placed in service (ready and available for business use) by December 31 of the tax year
Key deadlines
The vehicle or equipment must be placed in service by midnight on December 31 of the tax year. Ordering in December but taking delivery in January does not count — plan large purchases with delivery lead times in mind.
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