Year-End Tax Moves 2026: Section 179 and Bonus Depreciation Before December 31
Section 179 and bonus depreciation can cut your 2026 tax bill. See the limits, deadlines, common mistakes and a free savings estimator.
If you plan to buy equipment, computers, software or vehicles for your business, the next seven weeks matter. For 2026, a small business can generally deduct up to $2,560,000 of qualifying purchases in the year it buys and starts using them, thanks to Section 179, and bonus depreciation now allows 100% first-year expensing again after the 2025 tax law changes. The deadline that counts is December 31: the property usually has to be bought and placed in service by then, not just ordered.
This guide explains how Section 179 and bonus depreciation work together, which purchases qualify, the mistakes that cost owners deductions and a free estimator to see what a purchase could save. It is general information, not tax advice, so confirm the details with a CPA before you buy. Good records make this much easier, and our guide to the best bookkeeping software for small business can help you set that up.
What is Section 179, in plain English?
Normally, when a business buys a long-lived asset like a machine or a truck, it deducts the cost slowly over several years through depreciation. Section 179 lets you elect to deduct much or all of the cost in the first year instead. That can lower your taxable income right away and free up cash.
The key figures for tax year 2026, based on the IRS inflation adjustments in Revenue Procedure 2025-32, are:
| Item | 2026 figure |
|---|---|
| Maximum Section 179 deduction | $2,560,000 |
| Phase-out begins when qualifying purchases exceed | $4,090,000 |
| Reduction above the threshold | Dollar for dollar |
| Bonus depreciation for qualifying property | 100%, no dollar cap |
Section 179 is limited by the taxable income of your business, so it cannot be used to create a loss on its own. Amounts you cannot use this year can be carried forward. Bonus depreciation does not have that income limit.
How do Section 179 and bonus depreciation differ?
Both speed up deductions, but they work differently, and many businesses use them together.
| Feature | Section 179 | Bonus depreciation |
|---|---|---|
| Election | You choose property and amount | Applies automatically unless you opt out |
| Dollar limit | $2,560,000 in 2026 | None |
| Income limit | Cannot exceed business taxable income | Can create or increase a loss |
| Used property | Qualifies | Qualifies if rules are met |
| Choice by asset | Yes | By asset class |
| Form | Form 4562 | Form 4562 |
A common approach is to use Section 179 for specific assets you want to expense in full and let bonus depreciation handle the rest, depending on your income and plans. Whether that is best for you depends on your tax rate this year versus later, your state rules (some states do not follow the federal rules) and your cash needs. A CPA can run both scenarios in minutes.
Which purchases usually qualify?
- Machinery, tools and equipment used in the business.
- Computers, printers, phones and office furniture.
- Off-the-shelf software.
- Certain improvements to nonresidential buildings, such as roofs, HVAC, fire protection and security systems.
- Some vehicles, with special limits based on type and weight.
Business use matters. If you use an asset partly for personal reasons, the deduction is prorated, and when business use is 50% or less, Section 179 generally is not allowed. Vehicles have their own rules, especially heavy SUVs, so check the current limits before you buy one.
What is the real deadline?
For your 2026 return, the asset generally must be both purchased and put into use in 2026. Ordering a machine in December that is delivered and installed in January does not usually count for 2026. Delivery delays and installation time are common reasons owners miss out, so plan around the calendar, not the invoice date.
- By mid-November: decide what you really need and request quotes.
- By early December: place orders and confirm delivery dates in writing.
- By December 20: aim to have the asset delivered and working.
- By December 31: confirm in-service dates and keep proof.
Year-End Equipment Savings Estimator
Estimate the first-year deduction and a rough tax saving. For planning only.
What mistakes cost owners the most?
Buying only for the deduction
A deduction lowers your bill by your tax rate, not by 100%. Spending $40,000 to save $12,000 still leaves you $28,000 poorer. Buy what the business needs and will use.
Missing the in-service date
Paying in December is not enough. The asset must be ready and available for use in the business before year-end.
Ignoring taxable income limits
If your business income is low, Section 179 may not help much this year. Bonus depreciation or carrying the deduction forward may fit better.
Forgetting state rules
Some states limit Section 179 or do not follow bonus depreciation. Check your state, because the savings may be smaller than the federal estimate.
Poor records
Keep invoices, proof of payment, delivery receipts and a note of when the asset began operating. A short mileage or usage log protects vehicle deductions. Before you plan big purchases, check your cash with a simple cash flow forecast, so a deduction does not leave you short.
A worked example with real numbers
Imagine a landscaping company with $150,000 of taxable business income before any year-end purchases. The owner needs a new $60,000 work truck setup and $15,000 of tools and a trailer, all used 100% for the business. The combined tax rate on the last dollars of income is 30%.
| Step | Amount |
|---|---|
| Qualifying equipment bought and put in service | $75,000 |
| Estimated first-year deduction (if all qualifies) | $75,000 |
| Taxable income after deduction | $75,000 |
| Estimated tax saving at 30% | $22,500 |
| Cash actually spent | $75,000 |
| Net cost after the tax saving | $52,500 |
The saving is real, but notice that the owner still spent $52,500 of net cash. The deduction only makes sense if the truck and tools will earn that money back through more jobs or lower repair costs. Vehicle rules can also reduce the first-year amount, so a CPA should confirm how much of the truck qualifies.
Should you pay cash, finance or lease?
You can often claim the deduction even if you finance the purchase, because the cost of the asset, not the cash paid in the year, is what counts. A loan can protect your cash for payroll and slow months, while still letting you deduct the equipment this year. Leasing works differently: lease payments are usually deducted as they are paid, and Section 179 generally applies only if you own the asset. Compare interest cost, monthly payments and your tax situation before choosing, and ask whether any lender or dealer fees change the math.
What else should you consider before December 31?
- Retirement plan contributions for yourself and employees.
- Paying deductible bills you already owe, if you use cash accounting.
- Bad debts and inventory write-downs, with your accountant’s help.
- Whether Congress changes any rules in the lame-duck period, which we cover in our lame duck session guide.
Who should look at this now?
- Contractors and tradespeople buying tools and trucks.
- Restaurants and shops replacing equipment.
- Agencies and freelancers upgrading computers.
- Manufacturers and farms with large equipment needs.
Risks and limits
Tax law changes often, and this article reflects the IRS 2026 inflation adjustments and the 2025 tax law as of November 2026. Not every state follows federal rules, vehicles and listed property carry special limits and a deduction is only as good as your records. Confirm all figures on IRS.gov or with a licensed tax professional before you buy.
Before you finalize purchases, review your margins with our break-even point calculator to make sure the equipment pays for itself beyond the tax savings.
Quick checklist
- List the equipment you truly need.
- Check cash flow and financing.
- Confirm delivery and in-service dates.
- Run a CPA comparison of Section 179 and bonus depreciation.
- Check your state’s rules.
- Keep invoices, proof of payment and in-service records.
Frequently asked questions
What is the Section 179 limit for 2026?
$2,560,000, with the deduction phasing out dollar for dollar once qualifying purchases exceed $4,090,000, based on IRS Revenue Procedure 2025-32.
Is bonus depreciation 100% in 2026?
Yes, for qualifying property under the 2025 tax law changes. Check eligibility and your state rules with a tax professional.
Do I have to place the asset in service by December 31?
Generally yes. The property must be purchased and ready for use in the business during the tax year to count for that year.
Can I use Section 179 to create a loss?
No. Section 179 is limited to your business taxable income, but unused amounts can be carried forward. Bonus depreciation has no such limit.
Do vehicles qualify?
Some do, with special limits based on type, weight and business use. Check the current rules before buying.
Where do I claim the deduction?
On IRS Form 4562 with your business tax return. A tax professional can help you elect correctly.
Final takeaways
- The 2026 Section 179 limit is $2,560,000 with a phase-out starting at $4,090,000.
- Bonus depreciation is 100% for qualifying property.
- Assets must be bought and placed in service by December 31.
- Buy for business need first and tax savings second.
Daniel Reyes
Daniel Reyes leads the Businesstomark editorial desk, covering business news, company strategy and the tech products that shape how people work. He focuses on clear, practical explainers that help readers make smarter decisions, from choosing tools to understanding market moves.
