Section 179 Deduction
Section 179 allows businesses to deduct the full purchase price of qualifying equipment and software in the year it is placed in service, rather than depreciating it over multiple years.
Exam Tip
2025 limit: $1,250,000. Phase-out begins at $3,130,000. Cannot create a business loss. Applies to tangible personal property, off-the-shelf software, and qualified improvement property. Listed property rules apply for mixed-use assets.
What is Section 179?
Section 179 of the Internal Revenue Code lets businesses expense the full cost of qualifying assets in the year they are placed in service, instead of spreading the deduction over the asset's useful life through depreciation.
2025 Limits
| Limit | Amount |
|---|---|
| Maximum deduction | $1,250,000 |
| Phase-out threshold | Begins at $3,130,000 |
| Dollar-for-dollar reduction | Above $3,130,000 |
Qualifying Property
| Qualifies | Does NOT Qualify |
|---|---|
| Tangible personal property | Real property (generally) |
| Off-the-shelf software | Land |
| Qualified improvement property | Inventory |
| Business vehicles (with limits) | Property used outside U.S. |
Key Rules
- Cannot create a business loss (limited to taxable income from active trade/business)
- Listed property rules apply for mixed-use assets (must be >50% business use)
- Deduction is taken BEFORE depreciation
Exam Alert
2025 limit: $1,250,000 with phase-out at $3,130,000. Cannot create a business loss. Applies to tangible personal property, off-the-shelf software, and qualified improvement property. Listed property must be >50% business use. Section 179 is taken before bonus depreciation.
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