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Section 179: Definition, How It Works, and Example

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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the University of Lucerne in Switzerland.Adam's new book, "Irrational Together: The Social Forces That Invisibly Shape Our Economic Behavior" (University of Chicago Press) is a must-read at the intersection of behavioral economics and sociology that reshapes how we think about the social underpinnings of our financial choices.
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Updated May 06, 2025
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Section 179

Investopedia / Mira Norian
Definition

Secti꧒on 179 includes tangible assets, ๊such as machinery and equipment purchased for business use.

What Is Section 179?

Section 179 of the U.S. Internal Revenue Code allows businesses to write off some assets in the same year of purchase. The Section 179 deduction is applied at the asset's full value rather than at a 澳洲幸运5官方开奖结果体彩网:depreciated r🍌ate, even if the piece of equipment is financed.

Key Takeaways

  • Personal real estate is not allowed under Section 179, but business property may be eligible.
  • This deduction allows businesses to lower their current-year tax liability rather than capitalizing an asset and depreciating it over time in future tax years.
  • Section 179 is limited to a maximum deduction of $1,250,000 for tax year 2025.

How It Works

The section 179 expense deduction is limited to such items as cars, office equipment, business machinery, and computers. This speedy deduction can provide substantial tax relief for business owners who are purchasing startup equipment. The equipment must qualify for the deduction per the specifications within section 179 of the tax code, and the purchase price must be within the dollar amount ranges allowable by the code. The property must be pla🥂ced in service during the tax year for which the deduction is being claimed.

Tip

Equipment covered by the section 179 deduction might also qualify for 澳洲幸运5官方开奖结果体彩网:bonus depreciation, which further reduces the business owne💙r's tax bill.

Section 179 Details

The maximum amount you can elect to deduct for most section 179 property you placed in service in tax years beginning in 2025 is $1,250,000, according to the Internal Revenue Service (IRS).

Equipment, vehicles, and/or software purchased under Section 179 must be used for business purposes more than 50% of the time to qualify for the deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business use to arrive at the monetary amount eligible for Section 179.

Example

Imagine that a company has purchased a new piece of machinery used 100% for business purposes at a cost of $50,000 and zero salvage value. The company could take that asset and depreciate it over the course of 5 years as $10,000 each year. Section 179 would instead allow the company to 澳洲幸运5官方开奖结果体彩网:write off the entire $50,000 in the current year.

Can Estates and Trusts Use Section 179 Deductions?

No, estates and trusts are not able to deduct expenses using section 179.

What Is the Maximum Section 179 Deduction?

For tax year 2025, the maximum section 179 deduction is $1,250,000. "This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $3,130,000," the IRS states.

What Property Is Eligible for a Section 179 Deduction?

Tangible personal property, other tangible property as determined by the IRS, single-purpose agricultural livestock or horticultural structures, storage facilities used in connection with distributing petroleum or any primary product of petroleum, off-the-shelf computer software, and qualified real property.

Can Business Owner Write Off 100% of an SUV?

It depends on the cost of your SUV. For tax year 2025, the maximum section 179 expense deduction for SUVs is $31,300.

Does Rental Property Qualify for a Section 179 Deduction?

Rental property is only eligible for a Section 179 deduction if leasing property is associated with a trade or business. As the IRS states, "Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify."

The Bottom Line

With a section 179 deduction, taking the cost of the equipment as aཧn immediate expense deduction allows the business to get an immediate break on their tax burden, whereas capitalizing and then depreciating the asset allows for smaller deductions to be taken over a longer period. The section 179 expensing method is offered as an incentive for small business owners to grow their businesses with the purchase of new equipment🌄.

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