The One Big Beautiful Bill Act nearly tripled the old Section 179 limit, and many business owners are still planning around the pre-OBBBA cap. The 2026 limit after inflation adjustment is $2,560,000, more than twice what it was before the law changed.
What Section 179 Does
Section 179 lets a business deduct the full cost of qualifying property in the year it is placed in service, instead of depreciating it over years. The election is made on Form 4562 and must be filed with a timely return (including extensions).
Qualifying property includes:
- Tangible personal property used in a trade or business (machinery, computers, office furniture, tools)
- Off-the-shelf business software
- Qualified improvement property (interior improvements to nonresidential buildings)
- Certain business vehicles
Both new and used property qualifies, as long as it is used more than 50% for business.
2026 Limits After OBBBA
OBBBA raised the base Section 179 limit from $1,000,000 to $2,500,000 for property placed in service after December 31, 2024. The IRS adjusts that figure for inflation annually. For tax years beginning in 2026, the inflation-adjusted numbers are:
- Maximum deduction: $2,560,000
- Phase-out begins: $4,090,000 in qualifying purchases
- Full phase-out at: $6,650,000
The phase-out is dollar-for-dollar. If your qualifying purchases total $4,590,000, your maximum Section 179 deduction is reduced to $2,060,000 ($2,560,000 minus the $500,000 excess).
Vehicle Deduction Caps
Vehicles have additional limits that sit on top of the general Section 179 rules.
SUVs (6,001–14,000 lbs GVWR): The Section 179 deduction for SUVs is capped at $32,000 for 2026, regardless of purchase price. SUVs are not subject to the luxury auto depreciation limits, so the remaining cost basis can often be recovered via 100% bonus depreciation.
Passenger cars and light trucks/vans: Subject to the Section 280F luxury auto limits. The combined first-year cap (Section 179 plus depreciation) is approximately $20,400 for 2026.
Heavy work vehicles (over 14,000 lbs GVWR): Not subject to the SUV cap or luxury auto limits. Full Section 179 is available up to the general limit.
Section 179 vs. Bonus Depreciation
Both deductions allow immediate expensing of business property. They have different mechanics, and the right choice depends on your situation.
The most common planning move: apply Section 179 first to bring taxable income near zero, then use bonus depreciation for any remaining qualifying property. This avoids wasting Section 179 against income you do not have while still capturing immediate expensing on the rest.
Taxable Income Limitation
Section 179 cannot exceed your aggregate net taxable income from all active businesses for the year. If the deduction is limited by this rule, the unused amount carries forward indefinitely and is available in future years, subject to that year's income limitation.
This rule makes Section 179 most useful for profitable businesses. A startup with little or no current-year income typically gets more value from bonus depreciation, which carries forward as a net operating loss with no income restriction.
How to Elect Section 179
File Form 4562 with your timely filed return. Part I of Form 4562 lists each asset, its cost, and the Section 179 amount you are electing. You can mix Section 179 on some assets and bonus depreciation or regular MACRS depreciation on others; the election is made asset by asset.
You can revoke the Section 179 election, but only before the original filing deadline passes. After the deadline, revocation requires IRS consent and is rarely granted.
If you are buying equipment or making leasehold improvements this year, the new limits create a significant immediate deduction opportunity. Contact TS CPA to model the exact impact before you purchase.