Section 179 in 2026: the new limits after the One Big Beautiful Bill Act

The One Big Beautiful Bill Act, signed in July 2025, raised the Section 179 expensing limit and made 100% bonus depreciation permanent for qualified property acquired after January 19, 2025. For equipment buyers, 2026 is one of the most generous years on record for first-year write-offs.

The 2026 numbers

• Section 179 limit: $2,560,000 for tax years beginning in 2026.
• Phase-out: the limit drops dollar for dollar once total Section 179 purchases pass $4,090,000.
• Heavy SUVs (6,001 to 14,000 lbs GVWR): Section 179 limited to $32,000 per vehicle.
• Bonus depreciation: 100% for qualified property acquired after January 19, 2025, with no dollar cap.

The Section 179 figures come from IRS Rev. Proc. 2025-32, which adjusts the law’s $2.5 million and $4 million base amounts for inflation.

What changed

Before the law, the Section 179 limit was $1,250,000 for 2025 under the old schedule, and bonus depreciation was phasing down from 100% toward zero. The new law roughly doubled the Section 179 limit and stopped the phase-down. For most small and mid-sized businesses, that means the full cost of a year’s equipment purchases can be deducted in the first year.

Section 179 or bonus depreciation?

Both let you deduct the cost of equipment in the first year. They differ in the details, and many businesses use both.

• Section 179 is limited to your business taxable income; the excess carries forward. Bonus depreciation has no income limit and can create a loss.
• Section 179 has an annual cap and phase-out. Bonus depreciation has no cap.
• Section 179 is elected asset by asset. Bonus depreciation applies to whole classes of property unless you elect out.
• States treat them differently. Some states don’t follow federal bonus depreciation, so Section 179 can matter more for state taxes.

Financing and the deduction

Equipment bought with an equipment finance agreement, a loan or a $1-buyout lease generally qualifies just as cash purchases do. That means a business can deduct the full cost in 2026 while paying for the equipment over several years. A fair-market-value lease generally does not qualify, because the lessor owns the equipment; the lease payments are deducted instead.

An example

A contractor buys a $300,000 excavator in October 2026 with an equipment finance agreement and puts it to work in November. If the business has enough taxable income, it can deduct the full $300,000 on its 2026 return. At a 25% combined tax rate, that is about $75,000 in tax savings, while the 2026 payments on the excavator might be only a few thousand dollars, depending on the down payment, term and APR.

Deadline: placed in service

The equipment must be placed in service, meaning delivered, set up and ready to use, by December 31. Ordering or paying a deposit is not enough. Long lead times on trucks and heavy equipment mean year-end buyers should order early and confirm delivery dates in writing.

Estimate your savings with our Section 179 calculator. This article is general information, not tax advice; talk to your tax advisor before you buy.