Key Takeaways
- Tax Year 2024 limit: $1,220,000.
- Tax Year 2024 phase-out threshold: $3,050,000.
- Cannot exceed taxable income from active business.
- Heavy SUV limit (Tax Year 2024): $30,500.
- Qualified real property: QIP, HVAC, roofs, fire protection, security.
- Unused due to income limit: carryforward indefinitely.
Last updated: January 2026
Section 179 Expense Deduction
Why This Matters for the Exam
Section 179 is one of the most powerful deductions. The exam tests the limits, phase-out, and income limitation.
Expect at least 3-4 questions on §179.
Section 179 Limits
| Tax Year | Maximum Deduction | Phase-Out Threshold | Heavy SUV Limit |
|---|---|---|---|
| 2023 | $1,160,000 | $2,890,000 | $28,900 |
| Tax Year 2024 | $1,220,000 | $3,050,000 | $30,500 |
| 2025 | $1,250,000 | $3,130,000 | $31,300 |
Qualifying Property
| Type | Eligible? |
|---|---|
| Tangible personal property | Yes |
| Off-the-shelf software | Yes |
| Qualified real property (QIP, HVAC, roofs, etc.) | Yes |
| Land | NO |
| Buildings (general) | NO |
The Two Limitations
| Limitation | Description |
|---|---|
| Phase-Out | Reduced $1 for $1 above threshold |
| Taxable Income | Cannot exceed active business income |
Phase-Out Calculation (Tax Year 2024)
| Item | Amount |
|---|---|
| Total §179 property purchased | $3,250,000 |
| Threshold | $3,050,000 |
| Excess | $200,000 |
| Maximum deduction | $1,220,000 |
| Reduced by | $200,000 |
| Allowable | $1,020,000 |
Taxable Income Limitation
| Rule | Effect |
|---|---|
| §179 limited to | Business taxable income |
| If limited | Carryforward indefinitely |
| Note | Does NOT create NOL |
Ordering of Deductions
| Priority | Deduction |
|---|---|
| 1 | Section 179 (taxpayer election) |
| 2 | Bonus depreciation (remaining basis) |
| 3 | MACRS (any remaining basis) |
Heavy SUV Rule
| Vehicle | Rule |
|---|---|
| GVWR 6,000-14,000 lbs | §179 capped at $30,500 (Tax Year 2024) |
| GVWR >14,000 lbs | No §179 cap |
| Qualified nonpersonal use | No §179 cap |
Real-World Scenario (Tax Year 2024)
Scenario: Business has $100,000 taxable income. Buys $1,220,000 equipment.
- Phase-out: $1,220,000 < $3,050,000 → no reduction.
- Maximum §179: $1,220,000.
- Taxable income limit: $100,000.
- §179 deduction this year: $100,000.
- Carryforward: $1,120,000.
On the Exam
Expect 3-4 questions on §179, typically:
- Limit Questions: "What is the Tax Year 2024 §179 limit?"
- Phase-Out Questions: "What happens if purchases exceed threshold?"
- Income Questions: "What if taxable income is lower than §179?"
The key is to remember: $1,220,000 limit (Tax Year 2024). Phase-out starts at $3,050,000. Cannot exceed business income. Carryforward if limited by income.
Test Your Knowledge
Tax Year 2024: Business buys $4,200,000 qualifying equipment. Maximum §179?
A
B
C
D
Test Your Knowledge
Which nonresidential building improvement qualifies for §179?
A
B
C
D
Test Your Knowledge
§179 limited by taxable income. What happens to excess?
A
B
C
D