Updated: January 2026
Section 179 lets businesses elect to expense the cost of certain qualifying property in the year it’s placed in service, instead of depreciating it over time—subject to annual limits, phase-outs, and a business-income limitation.
Quick answer: Section 179 generally applies to equipment and machinery, certain business vehicles (special rules apply), and “off-the-shelf” computer software. Some improvements to nonresidential real property can also qualify, but most businesses use Section 179 primarily for equipment and vehicles.
To qualify, the property generally must be:
- New to you (new or used is OK, but it must be newly acquired by your business)
- Used more than 50% for business
- Placed in service (ready and available for its specific use) during the tax year
Financed purchases can qualify—Section 179 is not limited to cash purchases.
This page focuses on what qualifies. For 2026 limits, phase-out thresholds, and deadlines, see the Section 179 Deduction page.
Essential Criteria for Qualifying Property
To benefit from Section 179, your purchased or financed property must meet all of the following requirements:
Business Usage Exceeding 50%
The property must be used more than 50% for business in the year you place it into service. If usage is partly personal, the deduction is reduced proportionally.
“New to You” Acquisition
Whether brand new or used, the asset must be new to your business. You cannot claim Section 179 on equipment or software you already owned or used in the past.
Placed in Service During the Same Tax Year
The property must be installed and ready for active business use within the same tax year you plan to claim the deduction.
Purchased or Financed (Related-Party Restrictions Apply)
Section 179 requires that qualifying property be acquired by purchase for use in your trade or business. Paying cash isn’t required—many businesses finance equipment or vehicles and still claim Section 179 in the same tax year, as long as the transaction is treated as a purchase for tax purposes. Some lease structures may qualify; others may not.
For financing options, see Section 179 Qualified Financing.
> Prohibited Acquisitions: Related-party restrictions: Property acquired by gift or inheritance generally doesn’t qualify. Purchases from related parties (family members, controlled entities, etc.) are restricted and typically don’t qualify—even if fair market value is paid.
Business Usage Requirements
The “More Than 50% Business Use” Rule
The IRS mandates that property claimed under Section 179 be used predominantly (over 50%) for business. If you use an asset partly for personal reasons, your deduction is limited to the business-use percentage.
Example: If a computer is used 80% for business, only 80% of the property’s cost qualifies for a Section 179 deduction.
Record-Keeping Essentials
To substantiate your Section 179 claim, you must maintain detailed records, which may include:
- Purchase invoices or financing agreements
- Installation dates and the date you first place the item into service
- Usage logs for assets with both business and personal use (e.g., mileage logs for vehicles)
- Maintenance records that can help demonstrate consistent business use
Accurate documentation is your best defense if the IRS reviews your return—especially for vehicles and other “listed property.” If qualified business use later drops to 50% or less for listed property, part of the Section 179 deduction may have to be recaptured.
Types of Qualifying Property
Section 179 applies to a broad range of business-related property. Below are the most common categories that typically qualify, so long as all other requirements are met.
Equipment & Machinery
- Manufacturing equipment and production machinery
- Construction, mining, or agricultural equipment
- Industrial tools and specialized business machinery
- Warehouse storage systems (e.g., racks, conveyors)
Tangible Personal Property
- Office furniture (desks, chairs, filing systems, etc.)
- Office equipment (printers, copiers, phone systems)
- Professional-grade electronics (cameras, sound systems for commercial use)
Business Vehicles
- Many business vehicles can qualify—trucks, vans, SUVs, and work vehicles—but the rules vary by vehicle type, weight, and design
- Business use must be more than 50%, and mileage/usage substantiation is typically required
- Passenger automobiles and some SUVs are subject to additional limits; heavier trucks and vans may have more favorable treatment
For vehicle-specific rules, limits, and examples, Section 179 Vehicle Deductions
Computers & “Off-the-Shelf” Software
- Desktop and laptop computers
- Standard “off-the-shelf” software available to the general public (not custom-built)
- Peripheral devices (monitors, external drives) that are essential to business tasks
For software-specific details—including subscription (SaaS) considerations—see Section 179 and Software.
Certain Building Improvements (Non-Residential)
- Fire suppression systems
- Alarms and security systems
- HVAC (heating, ventilation, air conditioning)
- Roofing improvements
- Qualified improvement property (certain interior improvements)
These improvements must meet specific IRS definitions and be placed in service during the tax year. See IRS Publication 946 for detailed rules on building improvements.
Limitations and Thresholds
Annual Deduction Cap
Section 179 has an annual dollar limit and a phase-out threshold that are adjusted yearly for inflation. For the current 2026 limits and thresholds, see: Section 179 Deduction (2026).
Phase-Out Threshold
Section 179 is designed primarily for small and medium-sized businesses. As such, there is a phase-out that begins once your total eligible equipment purchases exceed a certain investment threshold. Every dollar above that threshold reduces your allowable deduction, dollar for dollar. In addition to the dollar limit and phase-out, Section 179 is subject to a business-income limitation—you generally can’t deduct more than your taxable income from active trades or businesses. Any disallowed amount can generally be carried forward to future tax years.
Listed Property Considerations
“Listed property” is a tax term for certain assets that lend themselves to personal use—most commonly passenger vehicles and certain other transportation or entertainment/recreation equipment.
- Listed property generally requires stricter substantiation (mileage logs, business-purpose documentation)
- If qualified business use is 50% or less, the property generally isn’t eligible for Section 179
- If you claim Section 179 and qualified business use later drops to 50% or less, recapture rules may apply
For vehicle-specific examples and limits, see Section 179 Vehicle Deductions. For state tax differences, see Section 179 by State.
Best Practices for Section 179 Success
Plan Your Purchases Strategically
Time your equipment acquisitions to maximize the tax impact, especially as year-end approaches. Placed-in-service timing matters—build in lead time for delivery, installation, and any setup, especially late in the year. Equipment financing can help you acquire and place assets in service while preserving working capital.
Track Business Use Meticulously
Keep mileage logs for vehicles and usage logs for dual-purpose equipment. If you ever face an audit, detailed records protect your deduction.
Stay Informed on Annual Limits
Section 179 limits and vehicle caps can change year to year (and state rules may differ). Check the current-year limits and, if relevant, your state treatment.
Combine With Bonus Depreciation
If you exceed the Section 179 cap, consider Bonus Depreciation to further increase your immediate write-offs. Section 179 and bonus depreciation can often be used together on the same equipment purchase, depending on the property type and your tax situation. See Section 179 vs. Bonus Depreciation for the current rules and practical differences.
Consult a Professional
Every business scenario is unique. Work with a CPA or tax advisor to ensure full compliance and to strategize around your particular needs.
Key Takeaways
- More than 50% business use: Critical to qualify—and must be maintained for listed property like vehicles
- New to you: Equipment can be new or used, as long as it’s acquired by purchase (not from related parties)
- Financed purchases qualify: You don’t need to pay cash—equipment financing typically qualifies
- Placed in service: Must be ready and available for use during the tax year you’re claiming
- Documentation matters: Especially for vehicles (mileage logs, business purpose records)
- Know the limits: Annual dollar cap, phase-out threshold, and business-income limitation all apply
Frequently Asked Questions
Does used equipment qualify for Section 179? Generally yes—Section 179 can apply to new or used equipment as long as it’s acquired by purchase (not from a related party), is “new to your business,” and meets the business-use and placed-in-service rules.
Can I take Section 179 if I finance equipment? Yes, in most cases. Section 179 is based on the cost of qualifying property you purchase and place in service—not whether you paid cash upfront. Many businesses use equipment financing to acquire assets now while capturing the full Section 179 deduction. See Section 179 Qualified Financing for options.
What does “placed in service” mean? Property is generally placed in service when it’s ready and available for its specific use in your business—not just ordered or delivered.
Can I buy equipment from a family member and claim Section 179? Generally no. Purchases from related parties (family members, controlled entities, etc.) typically don’t qualify for Section 179, even if you pay fair market value. This is a common misconception.
Does Section 179 apply to software subscriptions (SaaS)? Section 179 generally applies to “off-the-shelf” computer software that is purchased. Subscription (SaaS) arrangements are usually treated as services, not purchased software—so eligibility can differ. See Section 179 and Software.
Do building improvements qualify? Some improvements to nonresidential real property may qualify, but the definitions are narrow and exclusions matter. Most businesses use Section 179 for equipment and vehicles. See IRS Publication 946 for building improvement details.
What happens if my business use drops to 50% or less later? If you claimed Section 179 based on more than 50% business use and later use the property 50% or less for business, you may have to recapture part of the deduction. This is especially relevant for vehicles.
What property does NOT qualify? Common examples that generally don’t qualify include: land and land improvements (parking lots, fences); property used 50% or less for business; property acquired by gift, inheritance, or from a related party; inventory held for resale; and property used predominantly outside the United States.
Disclaimer: This page is intended for general informational purposes only and does not constitute tax or legal advice. Always consult an experienced tax professional or refer to official IRS publications for guidance specific to your situation.
By understanding what equipment, vehicles, and software qualify for Section 179—and keeping solid records—your business can make confident purchasing decisions and potentially reduce its tax bill. Consult a qualified tax professional for guidance on your specific situation.