Deduct the full price of qualifying equipment and off-the-shelf software in the year you place it in service. This calculator applies the 2025/2026 Section 179 limit of $1,250,000, the $3,130,000 dollar-for-dollar phase-out, the $31,300 SUV cap, the business-income limitation and prior-year carryforwards — and compares Section 179 against bonus depreciation and MACRS straight-line.
Situation: A machine shop buys $500,000 of new CNC equipment, places it in service in 2025 and has $800,000 of taxable business income. It elects Section 179 on the full cost.
Phase-out test: $500,000 < $3,130,000, so the full $1,250,000 limit is available. Cap: min($500,000, $1,250,000) = $500,000. Income limit: min($500,000, $800,000) = $500,000 allowed.
Tax saved at 21%: $500,000 × 21% = $105,000.
Situation: A company places $3,500,000 of qualifying property in service — $370,000 above the $3,130,000 threshold.
Reduction: the limit drops dollar-for-dollar by the excess: $1,250,000 − $370,000 = $880,000. Only $880,000 of the $3,500,000 can be expensed, and at $4,380,000 the deduction is fully phased out to $0.
Situation: The same $500,000 of 5-year equipment, evaluated under three first-year strategies for 2025.
Section 179: up to $500,000 in Year 1. Bonus (40% in 2025): $500,000 × 40% = $200,000. MACRS straight-line: $500,000 ÷ 5 = $100,000 per year.
Takeaway: Section 179 gives the largest first-year write-off when income is high; bonus depreciation needs no profitability.
Section 179 limit = $1,250,000 for 2025 and 2026.
Phase-out threshold = $3,130,000 of total property placed in service.
Fully phased out = $1,250,000 + $3,130,000 = $4,380,000 — no deduction at or above this level.
Business-income limitation = the deduction cannot exceed taxable income from active trades or businesses; the disallowed amount carries forward indefinitely.
Tax saved = Allowable deduction × marginal rate (21% for C corporations, up to 37% for pass-through owners).
| Figure | Amount | Notes |
|---|---|---|
| Maximum Section 179 deduction | $1,250,000 | Aggregate annual cap |
| Investment phase-out threshold | $3,130,000 | Phase-out begins here |
| 100% phase-out point | $4,380,000 | Limit + threshold; deduction hits $0 |
| SUV cap (GVWR over 6,000 lbs) | $31,300 | Per heavy passenger SUV |
| C corporation tax rate | 21% | Flat federal rate |
| Top individual / pass-through rate | 37% | Claimed on the owner's return |
| Tax Year | Bonus Depreciation | Notes |
|---|---|---|
| 2023 | 80% | Post-TCJA phase-down |
| 2024 | 60% | Post-TCJA phase-down |
| 2025 | 40% | Used in the comparison mode |
| 2026 | 20% | Final scheduled rate |
| 2027 | 0% | Expires unless Congress extends it |
Bonus depreciation does not count against the $1,250,000 Section 179 cap and has no business-income requirement. A business can elect Section 179 first, then apply bonus depreciation to the remaining basis.
Qualifies: new and used tangible personal property (machines, tools, computers, office furniture), off-the-shelf software, and qualified improvement property; vehicles are eligible up to statutory caps.
Does not qualify: real property (buildings, land), property used predominantly outside the U.S., property leased to others, and vehicles used mainly for personal purposes.
Deduct up to $1,250,000 of qualifying equipment in the year it is placed in service — recovering the full cost now instead of over the asset's recovery period.
Once property placed in service tops $3,130,000, the limit falls $1 for every $1 above the threshold, reaching $0 at $4,380,000.
The deduction cannot exceed taxable business income. Any disallowed amount is not lost — it carries forward indefinitely to a profitable year.
Passenger vehicles with a GVWR above 6,000 lbs are limited to $31,300 of Section 179; lighter vehicles use the luxury-auto depreciation caps.
Section 179 of the Internal Revenue Code lets a business immediately expense the full purchase price of qualifying equipment and off-the-shelf software in the year it is placed in service, instead of recovering the cost gradually through depreciation. For 2025 and 2026 the deduction is capped at $1,250,000, and the cap is reduced dollar-for-dollar once total property placed in service exceeds $3,130,000 — so it disappears entirely at $4,380,000 of investment.
Unlike bonus depreciation, Section 179 is limited to your taxable business income; any disallowed amount carries forward indefinitely. That is why this calculator asks for both your equipment cost and your taxable business income.
| Feature | Section 179 | Bonus Depreciation (168(k)) | MACRS Straight-Line |
|---|---|---|---|
| Annual dollar cap | $1,250,000 (2025/2026) | No dollar cap | No dollar cap |
| Investment phase-out | Dollar-for-dollar above $3,130,000 | None | None |
| Profit required | Yes — business-income limit | No | No |
| First-year deduction | Up to 100% of cost within the cap | 40% (2025), 20% (2026) | 20% per year over 5 years |
| Carryforward of unused amount | Yes — indefinitely | No | No |
Best for profitable businesses. Deduct up to $1,250,000 in Year 1 on new or used equipment and certain software, and carry forward anything the income limit blocks.
Best when income is thin. No cap and no profitability test, but the rate is only 40% in 2025 and 20% in 2026, applied to the basis left after any Section 179 deduction.
Best for steady income. Spreads a 5-year asset evenly as roughly 20% per year with no election paperwork — but the smallest first-year write-off of the three.
The phase-out is the most misunderstood part of Section 179. It reduces the dollar limit — not your deduction percentage — one-for-one with the amount by which total qualifying purchases exceed $3,130,000. Spend $3,500,000 and the limit drops from $1,250,000 to $880,000; at $4,380,000 it is $0, however profitable the business.
| Total Property Placed in Service | Dollar-for-Dollar Reduction | Section 179 Limit Available |
|---|---|---|
| $3,130,000 or less | $0 | $1,250,000 |
| $3,500,000 | $370,000 | $880,000 |
| $3,750,000 | $620,000 | $630,000 |
| $4,000,000 | $870,000 | $380,000 |
| $4,380,000 or more | $1,250,000 | $0 |
Two further limits apply on top of the cap. The business-income limitation caps your deduction at the taxable income from your active trades or businesses; the excess carries forward indefinitely. The SUV cap limits Section 179 to $31,300 for passenger vehicles with a GVWR above 6,000 lbs, while qualified heavy trucks and vans used more than 50% for business are not subject to that cap.
A $500,000 deduction saves $105,000 of tax at the 21% corporate rate but $185,000 at the 37% top individual rate — the same purchase, two very different after-tax costs.
⚠️ Disclaimer: This Section 179 calculator is for educational and estimation purposes only and is not tax advice. It assumes 2025 statutory figures ($1,250,000 limit, $3,130,000 phase-out threshold, $31,300 SUV cap, 21% corporate rate) and assumes the same Section 179 figures apply to 2026. Actual results depend on your entity type, basis, passive-activity rules, state conformity and elections made on your return. Consult a qualified tax professional before making expensing decisions.