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Tax Credits

What Is the Section 179 Deduction Limit for 2026?

For tax years beginning in 2026, the Section 179 limit is $2,560,000, phasing out above $4,090,000 of purchases. What qualifies, the business income limit, and how to elect it.

$2,560,000For tax years beginning in 2026, a business can elect to deduct up to $2,560,000 of qualifying equipment and software under Section 179, according to the IRS.
$4,090,000That limit shrinks dollar for dollar once the total cost of Section 179 property you place in service during the year goes over $4,090,000, and the deduction can't be more than your taxable business income for the year (any excess carries forward).
$32,000Maximum Section 179 deduction for sport utility vehicles: $32,000
$2,500,000For comparison, the One Big Beautiful Bill Act (Public Law 119-21) set the limit at $2,500,000 with a $4,000,000 phase-out threshold for tax years beginning in 2025, and those amounts are now adjusted for inflation each year.

For tax years beginning in 2026, a business can elect to deduct up to $2,560,000 of qualifying equipment and software under Section 179, according to the IRS. That limit shrinks dollar for dollar once the total cost of Section 179 property you place in service during the year goes over $4,090,000, and the deduction can't be more than your taxable business income for the year (any excess carries forward).

Last checked: October 24, 2026. This page is general information, not tax, legal, or financial advice.

What is Section 179?

Section 179 of the Internal Revenue Code lets a business choose to deduct the cost of certain property in the year it's placed in service, instead of depreciating it over several years. It's an election: you make it on IRS Form 4562 and attach it to your return. It's a deduction, not a credit, so it lowers taxable income, not the tax bill directly.

What are the 2026 numbers?

From IRS Revenue Procedure 2025-32 and IRS Publication 946, for tax years beginning in 2026:

Maximum Section 179 deduction: $2,560,000
Phase-out starts when Section 179 property placed in service exceeds: $4,090,000
Maximum Section 179 deduction for sport utility vehicles: $32,000

For comparison, the One Big Beautiful Bill Act (Public Law 119-21) set the limit at $2,500,000 with a $4,000,000 phase-out threshold for tax years beginning in 2025, and those amounts are now adjusted for inflation each year.

How the phase-out works (illustration only): if a business places $4,200,000 of Section 179 property in service in a 2026 tax year, it's $110,000 over the $4,090,000 threshold, so the $2,560,000 limit drops by $110,000 to $2,450,000. Whether a business can actually use that amount still depends on the business income limit below.

Who qualifies

What property qualifies for Section 179?

Eligible property, acquired for business use.
Acquired by purchase.
Eligible property includes:
Tangible personal property, such as machinery and equipment, office equipment, and property inside a building that isn't a structural component (the IRS lists examples like refrigerators, grocery store counters, printing presses, testing equipment and signs).
Off-the-shelf computer software that's available to the general public and hasn't been substantially modified.
Qualified real property you elect to include: qualified improvement property (certain interior improvements to nonresidential buildings) and certain improvements to nonresidential real property placed in service after the building was first placed in service: roofs, HVAC property, fire protection and alarm systems, and security systems.

Doesn't qualify

Land and land improvements, such as paved parking areas, fences, swimming pools, docks and bridges.
Property used 50% or less for business.
Property not acquired by purchase, such as property received as a gift or inheritance, or bought from certain related persons (for example, a spouse, parent or child).
Investment or rental property, if renting isn't your trade or business.

What is the business income limit?

After the dollar limit, the IRS caps your Section 179 deduction at your taxable income from the active conduct of any trade or business during the year. Any cost you can't deduct because of this limit carries forward to later years. The dollar limit applies to each taxpayer, not to each business, so an owner with several businesses (or interests in partnerships and S corporations) shares one limit. Married couples have special rules, covered in Publication 946.

How does Section 179 fit with bonus depreciation?

They're separate rules. IRS Publication 946 says that, unless you elect out, a 100% special depreciation allowance applies to certain qualified property acquired and placed in service after January 19, 2025. Which one to use on which asset, and in what order, affects your taxes in later years and in your state, so it's worth deciding with a CPA.

How to get it

How do you claim it?

Keep invoices showing the purchase price and the date each asset was placed in service.
Track business-use percentage for anything you also use personally, such as vehicles or computers.
Make the election on Form 4562, Part I, and attach it to your tax return for that year.
Have your tax preparer check the business income limit and any carryover from earlier years.

FAQ

Frequently asked questions

What is the Section 179 limit for 2026?

$2,560,000 for tax years beginning in 2026, reduced dollar for dollar once Section 179 property placed in service during the year exceeds $4,090,000 (IRS Rev. Proc. 2025-32; IRS Publication 946).

Can I take Section 179 if my business had a loss?

Generally, the deduction can't exceed taxable income from your active trades or businesses for the year. The amount you can't deduct carries forward to future years.

Does used equipment qualify?

Section 179 property must be acquired by purchase for use in your business, and property bought from certain related persons (such as a spouse, parent or child) doesn't qualify. Ask your tax preparer whether a specific used asset qualifies.

Is software eligible?

Off-the-shelf software that's available to the general public, under a nonexclusive license and not substantially modified, can qualify.

Can I use Section 179 on a building?

Not the building itself or the land. You can elect to include qualified improvement property and certain improvements (roofs, HVAC, fire protection and alarm systems, security systems) to nonresidential real property.

Programs that may match

Find the other programs that apply to the same purchase

Find the other programs that apply to the same purchaseA big equipment or software purchase can also connect to SBA financing, state sales tax exemptions or local incentives, depending on your state and industry.

Important: FundPlenty isn't a tax, legal or financial advisor, and this page isn't tax, legal or financial advice. Tax rules change, so confirm your eligibility and figures with a qualified tax professional before you claim anything.