Section 179 Tax Deduction: How to Save on Business Equipment in 2026

For Dallas business owners investing in equipment, the Section 179 tax deduction represents one of the most powerful financial levers available. We see smart operators use this provision every year to upgrade their operations through equipment financing while significantly lowering their tax liability.

The IRS allows businesses to deduct the full purchase price of qualifying equipment in the year it is placed in service. This approach replaces the old method of spreading the deduction over many years through slow depreciation.

Understanding how Section 179 works helps you keep more cash in your business. A strategic purchase in 2026 can save your company thousands or even hundreds of thousands of dollars.

What Is Section 179?

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. We often explain this as “immediate expensing” rather than capitalization.

Instead of writing off the cost over 5, 7, or even 39 years through standard depreciation, you take the entire deduction in year one. This immediate write-off is designed specifically to encourage small and medium-sized businesses to invest in themselves.

The Business Impact

Consider a business in the 21% corporate tax bracket (or higher for pass-through entities) that purchases $100,000 in qualifying equipment. We have seen this single move reduce a tax bill by $21,000 or more in the year of purchase.

Without Section 179, that same tax savings would trickle in slowly over several years. The immediate cash flow difference is often enough to cover the down payment on the equipment itself.

2026 Section 179 Limits

The IRS adjusts Section 179 limits annually for inflation. We monitor these adjustments closely to help our clients plan their capital expenditures accurately.

For 2026, the limits reflect the continued government focus on incentivizing business growth.

Expected 2026 Limits

Parameter	2026 Limit (Estimated)	What This Means
Deduction Cap	~$1,250,000	Maximum amount you can deduct immediately.
Spending Cap	~$3,130,000	Maximum equipment you can buy before the deduction reduces.
Bonus Depreciation	20%	The percentage you can deduct after hitting the Section 179 cap.

How the Phase-Out Works

If your total equipment purchases exceed the spending cap, your Section 179 deduction reduces dollar-for-dollar. For example, if the cap is $3.13 million and you purchase $3.23 million in equipment, your maximum deduction drops by $100,000.

Important: Always consult with a qualified tax professional for current limits and how they apply to your specific situation.

What Equipment Qualifies for Section 179?

Most tangible business equipment qualifies for Section 179 deductions. We find that many business owners are surprised by the breadth of items included, from heavy machinery to office furniture.

Qualifying Equipment

Machinery and Manufacturing Equipment

CNC machines, lathes, and milling stations
Assembly line components
Packaging machinery
Quality control instruments

Vehicles

Work trucks with a GVWR over 6,000 lbs
Cargo vans with no rear seating
Shuttle vans with seating for 9+ passengers
Specialized service vehicles wrapped with company branding

Office and Technology

Computers, servers, and routers
Office furniture and shelving
Copiers and multifunction printers
Off-the-shelf software (SaaS or perpetual license)

Construction and “Yellow Iron”

Excavators and backhoes
Bulldozers and graders
Concrete mixers and pumps
Cranes, forklifts, and skid steers

Qualified Improvement Property (QIP)

Interior renovations to non-residential buildings
HVAC systems and rooftop units
Fire protection and alarm systems
Security systems and roofing

Medical and Healthcare

Diagnostic imaging equipment (MRI, X-Ray)
Examination tables and dental chairs
Laboratory instruments
Patient monitoring systems

What Does NOT Qualify

Real property (land and new buildings)
Property used outside the United States
Property acquired from related parties (family or other controlled businesses)
Property used for lodging or residential rental (like apartment complex furniture)
Equipment you already own (you cannot “sell” it to yourself)

Section 179 vs. Bonus Depreciation

Section 179 is not the only accelerated depreciation option available to you. We help clients understand the critical interplay between Section 179 and Bonus Depreciation.

In 2026, this distinction is more important than ever because Bonus Depreciation is phasing out.

Key Differences

Feature	Section 179	Bonus Depreciation (2026)
Deduction Limit	Capped at ~$1.25M	No dollar limit
Rate	100% of cost	20% of cost
Profit Requirement	Must have business profit	Can create a Net Operating Loss (NOL)
Flexibility	Cherry-pick specific assets	All assets in a specific class (e.g., all 5-year property)

Using Both Together

Many businesses use Section 179 first because it offers a 100% deduction up to the limit. We advise using Section 179 to wipe out the cost of your most expensive assets.

Once you hit the Section 179 cap, you can apply the 20% Bonus Depreciation to the remaining balance. This combination maximizes your first-year write-offs despite the reducing Bonus rate.

Section 179 and Financed Equipment

One of the most powerful aspects of Section 179 is that it applies to financed equipment, not just cash purchases. We have seen this strategy turn a standard equipment purchase into a cash-flow-positive event in the first year.

You deduct the full purchase price, even if you put zero dollars down and finance 100% of the cost.

Example Scenario

A Dallas construction company finances a $150,000 excavator with zero down payment:

Equipment cost: $150,000
Down payment: $0
Section 179 deduction: $150,000
Tax savings (assuming 25% bracket): $37,500
First year loan payments: ~$30,000 (estimated)

The company saves $37,500 in taxes but only pays out $30,000 in loan payments during that first year. This creates a net positive cash flow of $7,500 simply by buying the equipment they needed anyway.

Strategic Financing

Some businesses time their equipment purchases and financing to maximize Section 179 benefits. We often help clients structure deals specifically for this timeline:

Identify equipment needs for the coming year.
Arrange financing with payments starting after year-end.
Take delivery before December 31.
Claim Section 179 deduction for the current tax year.
Begin payments in the following year.

Timing Your Equipment Purchases

Section 179 deductions apply to equipment placed in service during the tax year. We emphasize “placed in service” because simply paying for the item is not enough.

Year-End Planning

Equipment must be ready and available for use by December 31 to qualify for the current year’s deduction. We urge our clients not to wait until the last week of December.

Shipping delays or installation requirements can push the “in service” date to January 1, costing you a full year of tax savings.

Considerations for Timing

Delivery Status: The item must be on your premises.
Installation: It must be installed and tested.
Income Projection: Ensure you have enough profit to absorb the deduction.
Future Rates: Consider if tax rates might rise next year, making future deductions more valuable.

When to Wait

If your business is having a low-income year, utilizing the deduction now might waste it. We sometimes suggest waiting until January if your projected income for next year is significantly higher.

Section 179 for Dallas Industries

Different industries in Dallas benefit from Section 179 in various ways. We tailor our financing advice based on the specific asset classes relevant to your sector.

Construction and Trades

Heavy equipment purchases represent significant capital investments. A Dallas contractor purchasing $500,000 in yellow iron could save $125,000 or more in taxes.

Healthcare

Medical and dental equipment is expensive and qualifies for Section 179. We work with many practices that use these savings to upgrade to the latest digital imaging systems.

Restaurants and Hospitality

Commercial kitchen equipment, refrigeration systems, and point-of-sale systems all qualify. Restaurant owners specifically benefit from the inclusion of “Qualified Improvement Property,” allowing them to deduct renovations and HVAC upgrades immediately.

Manufacturing

Production equipment, quality control systems, and material handling equipment create large Section 179 opportunities. We see manufacturers use this to automate lines and reduce long-term labor costs.

Common Section 179 Mistakes

Avoid these errors when claiming Section 179 deductions. We have seen these simple oversights cause headaches during tax season.

Not Electing Section 179

Section 179 is not automatic. You must elect to take it on IRS Form 4562.

Work with your accountant to ensure this form is filed correctly with your annual return.

Missing the Deadline

Equipment must be placed in service by December 31. Purchasing in December but waiting for a January delivery means the deduction slips to the next tax year.

Exceeding Income Limits

Section 179 deductions cannot exceed your taxable business income. If your deduction is $100,000 but your profit is only $80,000, the remaining $20,000 carries forward to future years.

Poor Record Keeping

Maintain documentation proving when equipment was placed in service. Keep invoices, delivery receipts, and installation records in a safe place.

Ignoring State Rules

Not all states conform to federal Section 179 limits. Texas generally follows federal rules, but if you operate in multiple states, check local regulations.

Working with Tax Professionals

Section 179 rules are complex and interact with other tax provisions like Bonus Depreciation. We always recommend partnering with a qualified CPA or tax advisor.

A professional can help you:

Calculate your optimal Section 179 strategy.
Coordinate with the 20% Bonus Depreciation rule.
Ensure proper elections are made on Form 4562.
Document everything correctly for audit protection.

The cost of professional tax advice is usually far less than the potential savings from properly utilizing Section 179.

Equipment Financing and Tax Strategy

At Equipment Financing Dallas Pros, we understand that tax benefits are a crucial part of equipment investment decisions. We work with Dallas business owners to align their financing with their tax goals.

Our team assists you with:

Timing equipment purchases for maximum tax benefit.
Structuring financing agreements to complement Section 179 strategies.
Coordinating with your tax advisors on documentation.
Providing clear records needed for your tax filings.

Our goal is not just to help you acquire equipment, but to ensure your overall financial strategy strengthens your business.

Take Action Before Year-End

If you are considering equipment purchases, do not wait until December to start planning. We know that equipment financing takes time and delivery schedules can be unpredictable.

Contact Equipment Financing Dallas Pros today to discuss your equipment needs. We can help you secure financing quickly so you can take advantage of current-year tax benefits before the December 31 deadline.

Disclaimer: This article provides general information about Section 179 and should not be considered tax advice. Tax laws change frequently, and your specific situation may be different. Always consult with a qualified tax professional before making tax-related decisions.