Section 179 Deduction Calculator
Calculate your IRC Section 179 deduction for 2026 business equipment purchases. See the maximum deduction after phase-out, bonus depreciation on the remainder, total first-year write-off, and estimated tax savings. Based on OBBB-extended limits (P.L. 119-21) and IRS Publication 946. Free, private — runs entirely in your browser.
How Section 179 Works in 2026
Section 179 of the Internal Revenue Code allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year, rather than depreciating the cost over several years. For 2026, the maximum Section 179 deduction is estimated at $2,560,000 (raised from $1,250,000 to $2,500,000 for 2025 by the One Big Beautiful Bill Act, P.L. 119-21, then indexed to $2,560,000 for 2026). This deduction begins to phase out dollar-for-dollar when total equipment purchases exceed $4,090,000 and is completely eliminated at $6,650,000. The deduction cannot exceed your taxable business income for the year — any excess carries forward to future years. Source: IRS Publication 946, IRC Section 179.
Section 179 vs Bonus Depreciation
While both Section 179 and bonus depreciation allow accelerated write-offs, they serve different purposes. Section 179 is elected by the taxpayer and capped at $2,560,000 with a business income limitation. Bonus depreciation is a permanent 100% first-year write-off for qualified property acquired after 19 January 2025 under the OBBB (P.L. 119-21) — the old TCJA phasedown that would have cut it to 60% in 2026 was repealed. Unlike Section 179, bonus depreciation has no dollar cap and can create or increase a net operating loss. The optimal strategy for many businesses is to first claim Section 179 up to the limit, then apply 100% bonus depreciation to the remaining depreciable basis, and finally use regular MACRS depreciation for the balance. This calculator models that exact layered approach. Source: IRC Section 168(k), as amended by OBBB.
Section 179 Limits and Phase-Out
The phase-out mechanism prevents large businesses from claiming the full deduction. When total Section 179-eligible asset purchases in a single tax year exceed $4,090,000, the maximum deduction is reduced dollar-for-dollar by the excess. For example, if a business purchases $3,500,000 in equipment, the deduction limit drops from $2,560,000 to $880,000 ($2,560,000 minus $370,000 excess). At $6,650,000 in total purchases, the Section 179 deduction reaches zero. Additionally, the deduction cannot exceed net taxable income from all active trades or businesses. Unused deductions carry forward indefinitely to future tax years. This income limitation does not apply to bonus depreciation, which is one reason combining both strategies maximizes first-year savings.
Qualifying Property for Section 179
Section 179-eligible property includes tangible personal property (machinery, equipment, furniture, vehicles), off-the-shelf computer software, qualified improvement property (interior improvements to non-residential real property), and certain listed property used more than 50% for business. Passenger vehicles have a separate cap under IRC Section 280F — the first-year limit for SUVs over 6,000 lbs is $32,000 for Section 179 in 2026. Property must be purchased (not leased) and placed in service during the tax year. It must be used for business more than 50% of the time. Real property (buildings, land), property used outside the US, and property acquired from related parties do not qualify. Source: IRS Publication 946, Chapter 2. Limits verified against IRS Publication 946 (2025) tables for tax year 2026. Updated 2026-07-30.
Frequently Asked Questions
What is the Section 179 deduction limit for 2026?
The estimated maximum Section 179 deduction for 2026 is $2,560,000 (inflation-adjusted). This limit applies per taxpayer, not per asset. It begins to phase out when total equipment purchases exceed $4,090,000.
Can Section 179 exceed my business income?
No. The Section 179 deduction cannot exceed your net taxable income from all active trades or businesses. Any excess carries forward to future tax years indefinitely. However, bonus depreciation is not subject to this income limitation.
What is the bonus depreciation rate for 2026?
Bonus depreciation is a permanent 100% first-year deduction for qualified property acquired after 19 January 2025 under the One Big Beautiful Bill Act (P.L. 119-21), which replaced the old TCJA phasedown that would have dropped the rate to 60% in 2026. A taxpayer may elect a reduced 40% rate under section 168(k)(10) for the year that includes 20 January 2025. Source: IRS Notice 2026-11.
What property qualifies for Section 179?
Qualifying property includes tangible personal property (machinery, equipment, furniture), off-the-shelf software, and qualified improvement property for non-residential buildings. The property must be purchased (not leased) and placed in service during the tax year. Real property, land, and property used outside the U.S. do not qualify.
Can I use both Section 179 and bonus depreciation?
Yes. The optimal strategy is to first claim Section 179 up to its limit, then apply 100% bonus depreciation to the remaining depreciable basis, and finally use regular MACRS depreciation for the balance. This maximizes your first-year deduction.
Is there a vehicle limit for Section 179?
Passenger vehicles have a separate cap under IRC Section 280F. For SUVs over 6,000 lbs GVWR, the Section 179 deduction is capped at approximately $32,000 for 2026. Vehicles under 6,000 lbs have a lower first-year depreciation cap.
Does the Section 179 deduction carry forward?
Yes. If your Section 179 deduction is limited by the business income limitation, the unused portion carries forward to future tax years. However, the phase-out reduction (from exceeding the $4,090,000 purchase threshold) does not create a carryforward — it simply reduces the available deduction.