Section 179 Before Dec 31: Should You Buy Equipment Now?
Every December, small business owners hear the same advice: buy equipment before December 31 and write it off under Section 179. Sometimes that is smart planning. Sometimes it is an expensive way to save a little tax. This explainer covers how Section 179 works for 2026 and how to decide whether buying now really makes sense for you.
Key takeaways
- Section 179 lets you deduct the cost of qualifying equipment in the year it is placed in service, instead of spreading it over several years.
- For 2026 the limit is $2,560,000, phasing out once qualifying purchases exceed $4,090,000.
- The equipment must be bought and ready for use by December 31. Ordering it is not enough.
- A deduction only saves a portion of the price. Buy because the business needs it, not just for the tax break.
Section 179 of the US tax code is one of the most talked-about tax provisions for small businesses, especially in the last weeks of the year. Equipment dealers mention it in their sales pitches, and owners who have had a profitable year start wondering whether they should buy a new vehicle, machine or set of computers before the deadline.
The provision is genuinely useful. But it is easy to misunderstand what it does and when it applies. This guide explains the basics, the 2026 numbers, the timing rules and a simple way to decide. It is general information, not tax advice. Rules and limits change, so check IRS.gov or talk to an accountant before you make a purchase decision.
What Section 179 actually does
Normally, when your business buys equipment that lasts more than a year, you do not deduct the full cost in the year you buy it. Instead, you depreciate it, deducting a portion of the cost each year over the asset's useful life.
Section 179 lets you elect to deduct the full cost of qualifying property in the year you place it in service, up to an annual limit. The result is a larger deduction now and smaller deductions later. Over the life of the asset, the total amount you deduct is broadly the same. What changes is the timing.
That timing can be valuable. A bigger deduction this year lowers this year's taxable income, which can reduce the tax you owe in April and free up cash. But it also means less depreciation to deduct in future years, when your income might be higher.
What usually qualifies
Section 179 generally covers tangible business property such as machinery, equipment, computers, office furniture, certain vehicles and off-the-shelf software. Some improvements to business property can also qualify. Land and most buildings do not. The property must be used more than half the time for business.
Important
This article is general information, not tax or legal advice. Section 179 has detailed rules on what qualifies, business-use percentages, vehicles and how the election is made. Check the current IRS guidance or ask a qualified accountant about your situation.
The 2026 numbers
The One Big Beautiful Bill Act (OBBBA) increased the Section 179 limits. For 2026, the key figures are:
For most small businesses, those limits are far above what they spend in a year, so the limit itself is rarely the issue. The more important rules are about timing and income.
| Rule | What it means for you |
|---|---|
| Expensing limit of $2,560,000 | The maximum Section 179 deduction for 2026 |
| Phase-out above $4,090,000 | The limit shrinks dollar for dollar once total qualifying purchases pass this level |
| Placed in service by December 31 | Equipment must be bought and ready for use in 2026, not just ordered |
| Business taxable income limit | The deduction cannot exceed business taxable income. Excess carries forward |
| Vehicle limits | SUVs and some vehicles have separate, lower limits |
The December 31 rule: placed in service
The most common Section 179 mistake is about timing. To claim the deduction for 2026, the property must be placed in service by December 31, 2026. That means it has been bought and is ready and available for use in your business.
- Ordering is not enough. If you sign a purchase order on December 20 but the machine arrives on January 8, it generally counts for 2027.
- Installation matters. Equipment that needs installation or setup should be ready to use by December 31.
- Financing is fine. You can generally claim the deduction on financed equipment placed in service in the year, even if you are still paying for it. That can create a deduction larger than the cash you spent this year, but you still owe the full loan.
- Keep proof. Save invoices, delivery notes and installation records showing the date the equipment was ready for use.
Pro tip
If you are planning a December purchase, ask the supplier for a confirmed delivery and installation date in writing. Supply chains and holiday schedules can slow things down, and a delay of a few days can move the deduction into the next tax year.
Section 179 vs bonus depreciation
Section 179 is not the only way to deduct equipment quickly. Bonus depreciation can also allow a full first-year deduction. Under the OBBBA, 100% bonus depreciation is available for qualifying property acquired after January 19, 2025.
Section 179
- You choose which assets to expense and how much
- Limited to business taxable income, with excess carried forward
- Subject to the annual expensing limit and phase-out
Bonus depreciation
- Generally applies automatically unless you elect out
- Not limited to business taxable income in the same way
- Applies by class of property rather than asset by asset
Which one is better depends on your income, your state's tax rules and your plans. Some states do not follow federal bonus depreciation or Section 179 limits in full. Your accountant can model both and choose the combination that fits.
When buying before December 31 makes sense
A year-end purchase is most likely to be a good decision when several of these are true:
- You genuinely need the equipment. It replaces something worn out, adds capacity you will use or saves time and money.
- You were going to buy it soon anyway. Bringing a January purchase into December can pull the deduction into 2026.
- You have taxable profit to offset. The deduction is most useful when it reduces income that would otherwise be taxed.
- You can afford it. The purchase does not leave you short of cash for payroll, rent, taxes or a slow January.
- It can be in service by December 31. The supplier can deliver and you can set it up in time.
When it probably does not
Year-end purchases are less sensible when:
- The main reason is the tax break. A deduction only reduces tax by your marginal rate on the cost. You still spend the full price.
- Your profit is low this year. If the deduction would exceed business taxable income, the excess carries forward, so you get less benefit now.
- You expect much higher income next year. Spreading depreciation into higher-income years might be worth more.
- Cash is tight. Spending reserves before a quiet season can create a bigger problem than the tax saved.
- The delivery date is uncertain. If it may not arrive in time, the timing benefit disappears.
Example
Imagine a small print shop that had a strong year and planned to replace an old printer in February. The owner asks the supplier and confirms the new printer can be delivered and installed on December 18. Because she needs it anyway, has profit to offset and can pay without draining her reserve, she brings the purchase forward. By contrast, her friend who runs a quieter workshop considers buying an extra machine "for the write-off". After checking his cash and his expected low profit, he decides to wait.
Steps to take before December 31
- Run a year-to-date profit and loss. Estimate your 2026 taxable profit so you know how much a deduction could help.
- List equipment you need in the next six months. Separate genuine needs from nice-to-haves.
- Check cash flow. Make sure a purchase leaves enough to cover January bills, estimated taxes and any slow season.
- Talk to your accountant. Ask whether Section 179, bonus depreciation or regular depreciation fits best, and how your state treats them.
- Confirm delivery and setup dates. Get them in writing and allow a buffer for holiday delays.
- Keep records. Save invoices, financing documents and proof of the in-service date, and track business-use percentage where needed.
Your Section 179 year-end checklist
- Estimate 2026 business taxable income
- List genuinely needed equipment and its cost
- Confirm the purchase fits your cash flow and reserves
- Check vehicle rules separately if buying a vehicle
- Compare Section 179 and bonus depreciation with your accountant
- Get a written delivery and installation date before December 31
- Save invoices and proof of the placed-in-service date
Frequently asked questions
Can I claim Section 179 on used equipment?
Generally yes, used equipment can qualify as long as it is new to your business and meets the other rules. Check the details with your accountant.
What happens if my deduction is bigger than my profit?
The Section 179 deduction is limited to business taxable income. The excess generally carries forward to future years. Bonus depreciation follows different rules, which is one reason to compare both.
Can I deduct a new vehicle in full?
Not always. SUVs and some other vehicles have separate, lower limits, and business-use percentage matters. Check the current IRS rules before assuming a vehicle is fully deductible.
What if the equipment arrives on January 2?
If it was not placed in service by December 31, 2026, it generally counts for 2027 instead. The deduction is delayed by a year, not lost.
Related reading
The bottom line
Section 179 is a powerful way to bring forward the deduction for equipment your business needs. For 2026 the limits are high, but the rules that matter most to small businesses are simple: the equipment must be placed in service by December 31 and the deduction is limited to business taxable income.
Buy because the business needs the equipment and can afford it, then let the tax rules improve the timing. Talk to your accountant before you commit, and check IRS.gov for the current rules, since limits and details can change.
