Section 179 Deduction: How Small Businesses Write Off Equipment

Section 179 lets you deduct the full cost of business equipment and software in the year of purchase instead of depreciating it over several years. For small business owners buying equipment, vehicles, or software, this can create a significant immediate tax deduction.

The 2024 Limits

• Maximum deduction: $1,220,000
• Phase-out threshold: Begins when total qualifying property placed in service exceeds $3,050,000
• Business use requirement: The asset must be used for business at least 50% of the time

These limits reset each year and are adjusted for inflation. The deduction cannot exceed your business taxable income — but unused Section 179 deductions can carry forward to future years.

What Qualifies for Section 179

Qualifying property:

• Tangible personal property (machinery, equipment, computers, furniture, vehicles)
• Business vehicles (with limits — more on this below)
• Software (off-the-shelf)
• Qualified improvement property (certain improvements to business real property)

Does NOT qualify:

• Real property (land, buildings)
• Assets used for personal purposes (the business use test applies)
• Inventory
• Property received as a gift or inheritance

Equipment Examples

Computers and technology: A $2,000 laptop used 100% for business can be fully deducted in year one via Section 179. Without it, you’d depreciate $400/year over 5 years.

Office furniture: New desks, chairs, and shelving for your office — fully deductible in year purchased.

Machinery: A $25,000 manufacturing machine can be fully deducted in year purchased rather than over 7 years.

Software: Business software (accounting, design, manufacturing tools) qualifies if it’s off-the-shelf. Custom software follows different rules.

Vehicle Deduction Limits (Special Rules Apply)

Business vehicles are subject to luxury auto limits that reduce the Section 179 deduction:

For most passenger vehicles (2024):

• Year 1 maximum: $12,400 ($20,400 if bonus depreciation also applies)
• Subsequent years: $19,800 limit

Heavy vehicles exception: SUVs, trucks, and vans with a GVWR over 6,000 lbs have a different limit — Section 179 deduction up to $30,500 for vehicles in the SUV category (over 14,000 lbs GVWR: no limit).

This is why you see small business owners buying heavy SUVs — the deduction limits are significantly more favorable.

The 50% business use requirement: If you use a vehicle for both business and personal driving, you can only deduct the business use percentage. Keep a mileage log.

Section 179 vs. Bonus Depreciation

Bonus depreciation is a related but different provision. For 2024, bonus depreciation is 60% (phasing down from 100% in 2022).

The key difference: bonus depreciation can create a net operating loss (reducing income below zero, carrying to future years). Section 179 cannot exceed your taxable business income.

Many businesses use Section 179 first, then apply bonus depreciation to the remainder if needed.

How to Claim It

Report Section 179 on Form 4562. You’ll need:

• Description of property
• Date placed in service
• Cost
• Business use percentage
• Amount elected to expense

Most tax software (including TurboTax Self-Employed) walks you through Form 4562 with questions rather than requiring you to know the form structure.

Spreadsheet Tracking

Add a “Section 179” column to your business asset tracker:

Asset	Date purchased	Total cost	Business %	Section 179 deduction	Remaining to depreciate

This gives you a clear record of which assets you’ve expensed under Section 179 vs. depreciated over time, which matters for future planning and if you ever sell the asset.

Review your planned equipment purchases before year-end. If you’re considering buying equipment or software, purchasing by December 31 allows you to take the Section 179 deduction for the current tax year. A $10,000 equipment purchase at a 22% marginal rate = $2,200 in immediate tax savings.