The Section 179 deduction 2026 limits have increased with inflation adjustments. The maximum deduction is now $1.25 million, with the phase-out beginning at $3.13 million in total equipment purchases. Here's everything you need to know in one place.
2026 Section 179 Limits at a Glance
Year-Over-Year Comparison
Both the deduction limit and the spending cap are adjusted annually for inflation. Here's how 2026 compares to recent years:
| Tax Year | Deduction Limit | Spending Cap (Phase-Out) |
|---|---|---|
| 2026 | $1,250,000 | $3,130,000 |
| 2025 | $1,250,000 | $3,130,000 |
| 2024 | $1,220,000 | $3,050,000 |
| 2023 | $1,160,000 | $2,890,000 |
| 2022 | $1,080,000 | $2,700,000 |
How the Phase-Out Works
The Section 179 phase-out is dollar-for-dollar. Once your total qualifying purchases exceed $3.13 million, your maximum deduction decreases by one dollar for every dollar over the threshold.
Example: You purchase $3.33 million in qualifying equipment in 2026. That's $200,000 over the $3.13M spending cap. Your maximum Section 179 deduction drops from $1.25 million to $1.05 million ($1.25M minus $200K). If total purchases reach $4.38 million ($3.13M + $1.25M), the deduction phases out to $0.
This matters most for construction companies, manufacturers, and businesses making large capital investments. If you're approaching the phase-out threshold, timing purchases across tax years can preserve the full deduction.
What Qualifies for Section 179
- Equipment and machinery — manufacturing, medical, office, agricultural
- Business vehicles over 6,000 lbs GVWR — see our vehicle deduction guide
- Office furniture and fixtures
- Computers, software, and technology
- Qualified improvement property (QIP) — interior improvements to nonresidential buildings
- HVAC, roofing, fire protection, alarm, and security systems for nonresidential property
- New and used property — both qualify, as long as it's new to your business
What Doesn't Qualify
- Land and land improvements that are structural (though some site work qualifies under bonus depreciation)
- Buildings and structural components — the building itself is 39-year property
- Inventory — items held for sale to customers
- Property used outside the U.S.
- Property acquired from related parties — family members, controlled entities
- Air conditioning and heating units for residential rental property
Section 179 vs. Bonus Depreciation
Both provisions let you deduct the full cost of assets in year one, but they work differently. Use them together for maximum benefit:
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Annual limit | $1.25M | No limit |
| Creates a loss? | No — capped at taxable income | Yes — can generate NOL |
| 2026 rate | 100% (up to limit) | 100% (restored by OBBBA) |
| Phase-out | $3.13M spending cap | None |
| Asset selection | You choose which assets | Applies to all eligible unless you elect out |
Smart strategy: Apply Section 179 first to specific high-value assets (giving you control over the deduction), then let bonus depreciation handle the rest. This is especially effective when paired with a cost segregation study on commercial property.
Planning a major equipment purchase this year? We'll model the Section 179 and bonus depreciation impact before you buy — so you know the exact tax savings.
Book a Free Tax Strategy Review →Key Rules to Remember
- Placed in service by December 31 — the asset must be ready for use, not just ordered or paid for
- Business use must exceed 50% — if personal use exceeds 50%, the asset doesn't qualify
- Taxable income limitation — Section 179 cannot create or increase a net operating loss; any excess carries forward
- Passenger vehicle limits — cars under 6,000 lbs GVWR are subject to luxury auto caps (currently $20,400 first-year limit including bonus depreciation)
- SUV cap — heavy SUVs (6,000–14,000 lbs GVWR) are limited to $30,500 for Section 179, though remaining cost qualifies for bonus depreciation
Bottom line: The 2026 Section 179 limits give businesses substantial room to write off equipment purchases in year one. Combined with the restored 100% bonus depreciation, most businesses can deduct the full cost of qualifying assets regardless of amount — Section 179 handles the first $1.25M with precision, and bonus depreciation covers everything else.