By Income Tax Service Editorial — Reviewed by Diyan Yap, EA (IRS Enrolled Agent) — Updated July 19, 2026
Quick answer: For tax years beginning in 2026, Section 179 lets businesses immediately expense up to $2,560,000 of qualifying equipment and software, with the benefit phasing out dollar-for-dollar once total purchases exceed $4,090,000. Both limits are now permanent and inflation-indexed. Unlike bonus depreciation, Section 179 can’t create a loss — it’s capped at your business income.
Key facts:
- 2026 expensing limit: $2,560,000
- Phase-out threshold: begins at $4,090,000 of equipment placed in service (dollar-for-dollar reduction above it)
- Limits are permanent and inflation-indexed
- Income limit: the deduction can’t exceed your taxable business income — no losses created; excess carries forward
- Elected asset-by-asset — surgical control that class-wide bonus depreciation doesn’t offer
- Uniquely covers certain roofs, HVAC, fire/security systems on nonresidential buildings that bonus depreciation doesn’t
What is the Section 179 limit for 2026?
For tax years beginning in 2026, a business can elect to deduct up to $2,560,000 of qualifying property in the year it’s placed in service. The deduction shrinks dollar-for-dollar once the year’s total qualifying purchases pass $4,090,000 — at $6,650,000 of purchases, Section 179 is fully phased out. The design keeps 179 aimed at small and mid-sized businesses; companies above the phase-out lean on bonus depreciation instead.
Both numbers are permanent fixtures now, adjusted annually for inflation, which makes multi-year equipment planning far more predictable than it was during the years of temporary extensions.
What property qualifies for Section 179?
- Machinery and equipment used more than 50% for business
- Off-the-shelf software
- Business vehicles (with special limits for passenger vehicles and SUVs)
- Office furniture and fixtures, computers, signage
- Used equipment — new to you counts
- Nonresidential building systems that bonus depreciation does not cover: certain roofs, HVAC, fire alarm, and security systems placed in service on existing nonresidential buildings
That last category is Section 179’s exclusive turf and a big deal for building owners: a new roof on your shop or an HVAC replacement in your office building can be expensed under 179 even though it’s ineligible for bonus.
How does the income limit actually work? (worked example)
Section 179 cannot take taxable business income below zero. Watch it bind:
Elena’s construction S-corp has $120,000 of taxable business income in 2026. She buys $180,000 of equipment and elects Section 179 on all of it:
- Election: $180,000 (under the $2,560,000 cap — no problem there)
- Income limit: deduction allowed this year = $120,000 (income can’t go below zero)
- Carryforward: the remaining $60,000 carries forward to deduct against future years’ income
- Alternative: skip 179 and take 100% bonus depreciation on the same equipment — the full $180,000 deducts this year, creating a $60,000 business loss usable under the loss rules
Neither answer is automatically right: the loss may be worth more now (cash refund) or the carryforward may be worth more later (higher future bracket). This is precisely the modeling conversation to have before filing — not after.
Section 179 vs bonus depreciation: how do you choose?
With 100% bonus depreciation restored permanently, the two overlap more than ever. The differences that decide it:
| Decision factor | Section 179 | 100% Bonus |
|---|---|---|
| Dollar cap | $2,560,000 (2026) | None |
| Income limit | Yes — no losses | No — can create losses |
| Choice granularity | Per asset | Per asset class |
| Roofs/HVAC on nonresidential | Yes | No |
| Phase-out for big buyers | Above $4,090,000 | Never |
Practical playbook: elect 179 first on the assets where its unique powers matter (building systems; assets you want expensed while electing different treatment for others in the same class), then apply bonus to the remainder. High-purchase-volume years flip the order — past the phase-out, bonus does the work alone.
And remember the interaction with the QBI deduction: crushing income to zero with expensing can shrink a 20% deduction you’d rather keep. Optimize the combination, not each provision in isolation.
How do you claim Section 179?
- Elect on your return (Form 4562) for the year the property is placed in service — in use, not just purchased
- Track business-use percentage — under 50% business use disqualifies the asset, and use dropping later can trigger recapture
- Vehicles: passenger autos and SUVs carry their own annual caps below the general limit — check before assuming a full write-off on a heavy SUV or truck
- State conformity varies — many states cap 179 or decouple from bonus entirely; your state return may look very different from the federal one
- Partnerships and S-corps: the election happens at the entity level, but the dollar and income limits apply again at each owner’s level — coordinate before assuming every partner gets the full benefit
What should you do now?
- Mid-year purchase planning: if 2026 equipment needs are coming, you now have certainty on limits — schedule purchases around business need and income projections, not around expiring provisions.
- Own a commercial building? Roof, HVAC, alarm, and security upgrades belong on your 179 shortlist — expensing what bonus can’t touch.
- Project your income before electing. The 179 income cap, bonus-created losses, QBI, and state conformity move together — an IRS Enrolled Agent can model election combinations in one pass and keep the choice from costing you money in a higher-bracket future.
- Document placed-in-service dates — December deliveries that don’t go into use until January belong to the next tax year.
FAQ
What’s the difference between the $2,560,000 limit and the $4,090,000 number? $2,560,000 is the most you can deduct under 179 in 2026; $4,090,000 is the total-purchases level where that limit starts shrinking dollar-for-dollar. Buy enough equipment and 179 phases out entirely — bonus depreciation takes over from there.
Can Section 179 give my business a loss? No. The deduction stops at your taxable business income; anything disallowed carries forward. If you want the loss, 100% bonus depreciation is the tool.
Does a used truck qualify? Yes — used equipment qualifies for 179 as long as it’s new to your business, used over 50% for business, and placed in service during the year. Passenger-vehicle caps may still limit the first-year amount.
Can I use Section 179 and bonus depreciation in the same year? Yes — routinely. 179 is applied first on elected assets, bonus sweeps eligible remaining basis. The split is a planning choice, not a conflict.
Does Section 179 cover a new roof? On nonresidential buildings, yes — certain roofs, HVAC, fire, and security systems qualify under 179 even though bonus depreciation excludes them. Residential rental buildings don’t get this one.
Is the deduction use-it-or-lose-it? No — amounts blocked by the income limit carry forward indefinitely to future profitable years.
Sources
- Section179.org — 2026 deduction limits
- IRS: One Big Beautiful Bill provisions for individuals and workers
- IRS: Tax inflation adjustments for tax year 2026
This article is for educational purposes only and is not tax, legal, or financial advice. Tax rules change and individual situations vary — consult a qualified tax professional about your specific circumstances.