Investing in equipment can help your business increase capacity, improve efficiency or replace aging assets. It can also require a significant upfront investment. Section 179 may help eligible businesses reduce the after-tax cost of that equipment by allowing them to deduct some or all of the purchase price in the year it is placed in service.
For the 2026 tax year, businesses may be able to deduct up to $2.56 million in qualifying property under Section 179. The deduction begins to phase out when total qualifying purchases exceed $4.09 million. However, the amount a business can claim depends on several factors, including taxable income, business use and the type of property purchased. The IRS provides additional details in Publication 946.
How Section 179 Works
Normally, businesses recover the cost of equipment through depreciation over several years. Section 179 allows eligible businesses to elect to deduct qualifying costs in the year the property is placed in service instead.
This accelerated deduction can help reduce taxable income for the year, potentially allowing a business to retain more cash for other expenses and growth opportunities.
Can Financed Equipment Qualify?
Financing equipment does not necessarily prevent it from qualifying for Section 179. An eligible business may be able to claim the deduction based on the qualifying purchase price, even if it has not paid the full amount during the tax year.
This can make financing a valuable planning tool. A business may be able to put necessary equipment to work without paying the entire purchase price upfront while still potentially receiving the associated tax benefit.
Eligibility is based on the equipment, how it is used and the taxpayer’s individual circumstances, not simply how the purchase is funded.
Does Used Equipment Qualify?
Section 179 is not limited to brand-new equipment. Both new and used equipment may qualify, provided the property meets IRS requirements and is new to the business purchasing it.
This gives businesses greater flexibility when selecting equipment. Depending on the operation and budget, a used machine, vehicle or other asset may provide the right combination of capability, cost and potential tax benefits.
Don’t Overlook the Placed-in-Service Deadline
Purchasing or ordering equipment before year-end is not always enough to claim a deduction for that tax year.
For calendar-year taxpayers seeking a 2026 deduction, qualifying equipment generally must be placed in service by December 31, 2026. In practical terms, the equipment must be ready and available for its intended business use.
Delivery schedules, installation requirements and vendor lead times can all affect whether equipment is placed in service before the deadline. Businesses considering a year-end purchase should begin planning early, especially when financing approval, documentation, shipping or installation may be involved.
Can Section 179 and Bonus Depreciation Be Used Together?
Eligible businesses may be able to use Section 179 and bonus depreciation together. Section 179 is generally applied first, followed by bonus depreciation on the remaining eligible basis.
The best approach will depend on the business’s taxable income, equipment purchases and broader tax strategy. A qualified tax advisor can help determine which deductions are available and how they should be applied.
Planning an Equipment Purchase?
Section 179 can be a valuable incentive, but tax treatment should be only one part of an equipment purchasing decision. Businesses should also consider cash flow, operating needs, financing terms, and how quickly the equipment can begin generating value.
If new or used equipment is part of your 2026 plans, Commercial Capital can help you explore financing options designed around your business and its cash flow. Contact our team to discuss an upcoming purchase and determine what financing structure may work best for you.
This content is provided for general informational purposes only and should not be considered tax, legal, or accounting advice. Tax rules and eligibility requirements vary. Please consult a qualified tax professional regarding your specific circumstances.