Section 179 Deduction Calculator
Determine how much of your business equipment purchase you can expense immediately under IRC Section 179 instead of depreciating over multiple years.
What Is the Section 179 Deduction?
IRC Section 179 allows businesses to deduct the full purchase price of qualifying equipment and software in the year it is placed in service, rather than capitalizing and depreciating the cost over multiple years. For 2025, the maximum deduction is $1,250,000 (indexed for inflation), and the deduction begins to phase out dollar-for-dollar when total qualifying purchases exceed $3,130,000 in a single tax year. Qualifying property includes tangible personal property used in business (machinery, equipment, computers, furniture, most software), certain qualified real property improvements (roofs, HVAC, fire protection, alarm systems, security systems), and off-the-shelf software. Vehicles have special limits: passenger cars are capped, but SUVs and trucks exceeding 6,000 lbs GVWR qualify for up to $30,500 of Section 179 expensing. The critical limitation is that the Section 179 deduction cannot exceed the taxpayer's aggregate net business income from all active trades or businesses. Unlike bonus depreciation, Section 179 cannot create or increase a net operating loss. Any unused Section 179 amount carries forward indefinitely.
How to Use This Calculator
Enter Equipment Cost
Input the total cost of qualifying business equipment purchased and placed in service during the tax year.
Enter Net Business Income
Provide your net business income (or expected income). The Section 179 deduction is limited to this amount since it cannot create a business loss.
Set Your Tax Rate
Enter your estimated combined federal and state marginal tax rate to calculate the actual dollar savings from the deduction.
Key Concepts
2025 Deduction Limit ($1.25M)
You can expense up to $1,250,000 of qualifying equipment in a single year. This limit is indexed for inflation and adjusted annually.
Phase-Out Threshold ($3.13M)
The deduction is reduced dollar-for-dollar once total asset additions exceed $3,130,000. At $4,380,000, the deduction is fully phased out.
Business Income Limitation
Section 179 cannot create a net operating loss. The deduction is capped at aggregate net income from all active trades or businesses. Excess carries forward.
Vehicle Limits
Passenger autos face Section 280F caps. SUVs over 6,000 lbs GVWR get up to $30,500 of Section 179. Heavy trucks and vans over 6,000 lbs may qualify for the full deduction.
Interaction with Bonus Depreciation
Apply Section 179 first. Any remaining basis (cost minus 179) can then receive bonus depreciation (40% in 2025). The balance is depreciated under MACRS.
Expert Insights
The Most Powerful Small Business Incentive: Section 179 is the single most powerful tax incentive for small and mid-size businesses. Unlike bonus depreciation, which phases down to 40% in 2025, Section 179 gives a full dollar-for-dollar write-off in year one -- but only if you have sufficient business income. The optimal strategy often involves layering: use Section 179 up to the income limitation, apply bonus depreciation on the remaining basis, and then depreciate any leftover balance under regular MACRS.
Timing and Mid-Quarter Trap: Equipment must be placed in service (not merely purchased or ordered) before year-end to qualify. Many businesses accelerate December purchases to capture the deduction, but beware of the mid-quarter convention trap: if over 40% of your annual asset additions occur in Q4, all assets placed in service that year must use the less favorable mid-quarter convention for MACRS purposes on any basis not covered by 179 or bonus.
Financed Equipment Still Qualifies: For equipment financed with loans, Section 179 applies to the full purchase price in year one, not just the amount paid out of pocket. A $200,000 equipment loan generates a $200,000 deduction immediately even though payments stretch over 5 years -- an extraordinary cash flow benefit.
Frequently Asked Questions
This calculator provides estimates for educational purposes only. Tax laws change frequently and individual circumstances vary. These estimates do not constitute tax advice. Consult a qualified CPA or tax professional before making tax-related decisions.
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