Deduct the full cost of your equipment this year, and pay for it over time
Section 179 of the tax code lets a business deduct the full price of qualifying equipment and off-the-shelf software in the year it goes into service, instead of depreciating it over 5 to 7 years. The part most owners miss: financed equipment qualifies too. You can write off the whole purchase this year while making only a few monthly payments on it.
Your equipment write-off options, explained
Liberty Capital Group on how equipment financing and Section 179 work together.
Section 179 limits for 2026 and 2025
The One Big Beautiful Bill Act, signed July 4, 2025, doubled the Section 179 limits for property placed in service after December 31, 2024, and ties them to inflation from 2026 on.
| 2026 tax year | 2025 tax year | |
|---|---|---|
| Maximum Section 179 deduction | $2,560,000 | $2,500,000 |
| Phase-out begins at total equipment purchases of | $4,090,000 | $4,000,000 |
| Deduction fully phased out at | $6,650,000 | $6,500,000 |
| Heavy SUV cap (6,001 to 14,000 lbs GVWR) | $32,000 | $31,300 |
| Bonus depreciation | 100% | 100% (property acquired after Jan 19, 2025) |
The deduction drops dollar for dollar for every dollar of qualifying purchases above the phase-out threshold. Limits are indexed each year by the IRS (2026 figures: Rev. Proc. 2025-32).
What it can look like on a $150,000 machine
A contractor finances a $150,000 excavator with $0 down and puts it to work in October 2026.
In this example the first-year tax savings are far larger than the payments made that year, so the equipment helps pay for itself. Your actual savings depend on your bracket, state taxes, entity type and taxable income. This is an illustration, not tax advice.
How the financing structure affects your deduction
The IRS looks at who effectively owns the equipment. If the deal works like a purchase, you can take Section 179. If it is a true rental, the lessor owns it.
| Structure | Section 179? | How you deduct it |
|---|---|---|
| Equipment Finance Agreement (EFA) | Yes | You own it from day one. Deduct the full price, plus the interest as it is paid. |
| Equipment loan | Yes | Same as an EFA: full-price deduction plus interest. |
| $1 buyout lease | Yes | Treated as a purchase for tax purposes (a conditional sale), so it qualifies. |
| 10% purchase-option lease | Usually | Often treated as a purchase. Confirm with your CPA. |
| Fair Market Value (FMV) lease | No | The lessor owns it. Your monthly payments are generally deductible as a business expense instead. |
Not sure which is right for you? Read types of equipment leases, or price a structure with the lease payment calculator.
What you can write off
- Machinery and production equipment
- Construction, farm and landscape equipment
- Work trucks, vans and heavy vehicles over 6,000 lbs GVWR (SUVs capped at $32,000)
- Computers, servers, phones and off-the-shelf software
- Restaurant, medical, dental and fitness equipment
- Office furniture and fixtures
- Roofs, HVAC, fire protection and security systems on non-residential buildings
- New and used equipment, as long as it is new to you
What Section 179 won't cover
- Land and most buildings
- Equipment used 50% or less for business
- Property bought from a related party
- Inventory you hold for resale
- Equipment used mainly outside the U.S.
- Passenger cars and light SUVs above the luxury-auto limits
- Equipment rented under an FMV lease
Two ways to write it off, and why the difference matters
| Section 179 | Bonus depreciation | |
|---|---|---|
| How much | Up to $2,560,000 (2026) | 100% of the cost, with no dollar cap |
| Limited to business income? | Yes. Any unused amount carries forward | No. It can create a loss |
| Pick and choose assets | Yes, asset by asset | No, it applies to a whole asset class unless you opt out |
| Spending phase-out | Starts at $4,090,000 | None |
| State tax treatment | Many states follow it, with lower limits | Many states don't allow it (California is one) |
Many businesses use both: Section 179 first, then bonus depreciation on the rest. California businesses in particular should ask their CPA, because the state caps Section 179 at $25,000 and does not follow federal bonus depreciation.
The December 31 deadline is about delivery, not the order date
To deduct equipment on your 2026 return, it has to be placed in service (delivered, installed and ready to use) by December 31, 2026. Ordering or signing in late December is not enough if the equipment arrives in January.
- Now through OctoberGet approved early. An approval covers you while you shop and lock in pricing.
- NovemberConfirm delivery and install dates with the vendor. Allow for backorders and upfits.
- Early DecemberSign and fund. We usually pay the vendor 1 to 5 days after signing.
- By December 31The equipment is in use at your business. Keep the delivery receipt for your records.
Recapture: what happens when you sell or stop using it
Section 179 speeds up the deduction; it doesn't make it tax-free forever. If you later sell the equipment for more than its remaining tax value, that gain, up to the amount you deducted, is taxed as ordinary income (depreciation recapture). If business use drops to 50% or less before the end of the equipment's recovery period, part of the deduction is recaptured too. Plan trade-ins and sales with your tax professional.
Questions to ask your CPA
How we help fund your equipment
Section 179 questions
Can I take Section 179 on financed equipment?
Yes. With an equipment finance agreement, loan or $1 buyout lease, you can deduct the full purchase price in the year the equipment goes into service, even though you pay for it over time.
What is the Section 179 limit for 2026?
The maximum deduction is $2,560,000. It starts to phase out once total qualifying purchases for the year go above $4,090,000 and is gone at $6,650,000.
Does used equipment qualify?
Yes, as long as it is new to your business and was not bought from a related party.
Does an FMV lease qualify for Section 179?
No. Under a Fair Market Value lease the lessor owns the equipment. Your lease payments are generally deductible as a business expense instead.
When does the equipment have to be in service?
By December 31 of the tax year. It must be delivered and ready to use, not just ordered or financed.
What if my business doesn't have enough income this year?
Section 179 is limited to your business taxable income, and any unused amount carries forward to future years. Bonus depreciation has no income limit, so many businesses use it instead or alongside.
Do trucks and vans qualify?
Work trucks and vans over 6,000 lbs GVWR generally qualify for the full deduction. Heavy SUVs in that weight range are capped at $32,000 for 2026. Lighter passenger vehicles fall under the luxury-auto limits.
Is Liberty Capital Group a tax advisor?
No. We arrange the financing and can structure it to fit your plan, but your CPA or tax professional should confirm how Section 179 applies to your business.
Lock in your 2026 write-off before year-end
Get approved now, deliver by December 31, and pay over up to 72 months. One application, often approved by the next day.
Liberty Capital Group, Inc. is not a tax or legal advisor. Section 179 figures are from IRS Rev. Proc. 2025-32 and the One Big Beautiful Bill Act (Pub. L. 119-21) and are for general information only. Consult your tax professional about your situation. All financing is subject to credit approval. NMLS #2009539 · CA DFPI #60-DBO49692.