Definition
The Section 179 deduction lets businesses deduct the full purchase price of qualifying equipment in the year it is placed in service, up to an annual limit.
How It Works
Rather than depreciating equipment over years, a business expenses it immediately, subject to an annual dollar cap and a phase-out once total equipment purchases exceed a threshold. The deduction cannot exceed business income, so it cannot create a loss.
Example
A business buys $80,000 of qualifying equipment and deducts the full amount in year one under Section 179.
When It Works Best
It works well for profitable businesses making moderate equipment purchases who want an immediate deduction within the income limit.
Who It Applies To
Businesses purchasing qualifying equipment or certain property.
Watch-Outs
Unlike bonus depreciation, Section 179 is capped annually and cannot create a loss, so larger purchases often use bonus depreciation instead or in combination.
