Get tax break on your 2025 equipment purchase with section 179

February 5, 2025

2025 with Section 179

Get Tax Breaks on Your 2025 Equipment Purchases with Section 179

Section 179 remains one of the most powerful tax-saving strategies available to businesses, offering an opportunity to deduct significant expenses associated with purchasing qualifying equipment, machinery, and software. In 2025, this deduction continues to deliver strong benefits for businesses looking to invest in new assets that boost productivity and efficiency.

Imagine you’re a business owner eyeing an important new purchase—whether it’s state-of-the-art machinery, advanced software, or an updated vehicle fleet. Enter Section 179 of the IRS tax code, which allows you to deduct the full purchase price of eligible property in the year it’s placed into service. This provision is like a turbocharger for your tax strategy, helping you immediately capitalize on your business investments.

In this guide, we’ll explore the details of Section 179, including updated eligibility requirements, deduction limits for 2025, and tips on how to make the most of these tax savings.

What is Section 179?

Section 179 is a provision of the Internal Revenue Code (IRC) that lets businesses deduct the cost of certain qualifying assets in the year they are put into use. To qualify for the deduction, the property must be used primarily in the conduct of business—meaning it must play a significant role in daily operations—and it must be eligible for depreciation under the IRC.

The key benefit of Section 179 is that it allows businesses to take advantage of tax savings sooner rather than later, helping to free up capital for further investments or operational needs.

Section 179 Limits for 2025

For the 2025 tax year, businesses can take advantage of a maximum Section 179 deduction of $1,220,000, provided they meet the qualifications. However, there’s a spending cap of $3,050,000. This means that if your business purchases qualifying equipment worth $3,050,000 or more in 2025, the maximum deduction available will be $1,220,000. Any amount above that threshold will need to be depreciated over time, as the Section 179 deduction phases out dollar-for-dollar after the $3,050,000 spending cap is reached.

In summary:

Maximum Deduction for 2025: $1,220,000
Spending Cap for 2025: $3,050,000
After exceeding the cap, the deduction phases out gradually.

What Section 179 Can Deduct and What It Can't

Section 179 allows businesses to deduct the cost of a wide range of assets, as long as they meet the eligibility criteria. Below are some examples of property types that qualify for the Section 179 deduction in 2025:

Qualifying Property

1. Machinery and Equipment: Businesses that rely on heavy machinery, tools, or office equipment have the most to gain. Manufacturing and production equipment, computers, and office furniture are all eligible for the Section 179 deduction.

2. Vehicles: For businesses that use vehicles in their operations, Section 179 offers a valuable deduction. However, to qualify, vehicles must have a gross vehicle weight rating (GVWR) of more than 6,000 pounds. This rule ensures that the deduction is used primarily for business vehicles rather than personal cars. For passenger vehicles with a GVWR over 6,000 pounds, businesses can deduct up to $28,900 in 2025.

3. Computers and Software: Investing in technology is a significant part of staying competitive. Section 179 allows businesses to deduct the full cost of computers, software, and related equipment, thus lowering the overall tax burden.

4. Qualified Improvement Property:This includes improvements made to the interior of non-residential properties (like offices, retail spaces, or restaurants). Upgrades to items like HVAC systems, roofing, and fire protection systems are eligible for Section 179 deductions, helping businesses create more efficient and attractive environments.

Non-Qualifying Property

1. Land: Land is not eligible for the Section 179 deduction because it is not depreciable property. Section 179 only applies to assets that lose value over time, and land typically appreciates.

2. Buildings: While businesses may operate out of buildings, the cost of purchasing or improving buildings themselves is not eligible for Section 179. However, improvements to the interior of the building (if they qualify as "qualified improvement property") are deductible.

3. Inventory: Inventory, including goods held for sale, is excluded from Section 179 deductions. This is because inventory is treated as a current asset and subject to different tax rules.

4. Personal Property: Personal property not used for business purposes, such as clothing or household items, does not qualify for Section 179.

Additional Key Considerations for Section 179 in 2025

1. Phase-Out Thresholds: Be mindful of the phase-out threshold. If your business’s total purchases of qualifying equipment exceed $3,050,000 in 2025, your Section 179 deduction will begin to decrease dollar-for-dollar.

2. Bonus Depreciation: Section 179 works in tandem with bonus depreciation, which allows businesses to deduct a percentage (typically 60% in 2025) of the cost of qualifying assets in the year they’re placed in service. Combining Section 179 with bonus depreciation can maximize your deductions. However, bonus depreciation applies to assets that exceed the Section 179 limits, offering additional savings on large purchases.

3. Leased or Financed Equipment: You can also claim the Section 179 deduction for leased or financed equipment, as long as the equipment meets the eligibility criteria. This allows businesses to take advantage of the deduction even if they don't purchase the equipment outright.

4. Qualified Real Property: For the 2025 tax year, Section 179 continues to apply to qualified real property improvements, including roofs, HVAC systems, fire protection systems, security systems, and alarm systems. These types of property enhancements, made to non-residential buildings, are eligible for Section 179 deductions.

5. State-Level Variations: Although Section 179 is a federal provision, keep in mind that some states have their own limits or rules regarding deductions. Some states follow the federal guidelines, while others may offer different benefits. Be sure to check your state’s specific tax regulations when planning your strategy.

6. Documentation and Compliance: Proper record-keeping is crucial when claiming Section 179 deductions. Keep detailed documentation of your purchases, business use, and calculations. This will be essential if you are audited by the IRS.

Conclusion

Section 179 continues to be an invaluable tool for businesses in 2025, offering the ability to deduct the full cost of qualifying equipment and improvements in the year they’re placed into service. By strategically utilizing this provision, businesses can lower their tax liability, free up capital for reinvestment, and drive growth.

If you’re considering purchasing new equipment or making significant improvements to your business, now is the time to take advantage of Section 179. Work with a tax advisor or partner like **Founder Funding** to ensure you maximize your deductions and optimize your tax strategy.

Don’t leave money on the table—explore Section 179 today and start saving on your 2025 tax bill.

This blog is for informational purposes only. Always consult with a tax advisor to understand how Section 179 applies to your specific business.

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Common reasons for seeking a business loan include: Starting a new business Purchasing inventory or equipment Expanding operations Hiring additional staff Covering cash flow gaps Having a clear purpose for the loan will not only help you determine the amount you need but also demonstrate to lenders that you have a solid plan in place. 2. Understand Your Loan Options There are several types of business loans available, each designed to meet different needs. Some of the most common options include: Term Loans: A lump sum of money repaid over a set period with interest. Ideal for large, one-time expenses. SBA Loans: Government-backed loans with favorable terms, often used for startups or small businesses. Business Lines of Credit: Flexible funding that allows you to draw funds as needed, perfect for managing cash flow. Equipment Financing: Loans specifically for purchasing business equipment, with the equipment itself serving as collateral. Invoice Financing: Advances on outstanding invoices to improve cash flow. Research each option to determine which one aligns best with your business needs. If you’re unsure where to start, Founder Funding can help you explore the best financing solutions tailored to your business. 3. Check Your Credit Score Your personal and business credit scores play a significant role in the loan approval process. Lenders use these scores to assess your creditworthiness and determine the terms of your loan. Before applying, review your credit reports and address any errors or issues that could negatively impact your score. If your credit score is lower than desired, consider taking steps to improve it before applying for a loan. 4. Prepare Your Documentation Lenders will require specific documents to evaluate your loan application. Common requirements include: Business plan Financial statements (profit and loss, balance sheet, cash flow) Tax returns (personal and business) Bank statements Legal documents (business licenses, articles of incorporation) Having these documents ready in advance can streamline the application process and improve your chances of approval. Founder Funding can guide you through the documentation process to ensure your application is complete and compelling. 5. Compare Lenders Not all lenders are created equal. Take the time to compare offers from banks, credit unions, and online lenders. Consider factors such as interest rates, repayment terms, fees, and customer reviews. By shopping around, you can find a lender that offers the best terms for your business. Alternatively, you can simplify the process by applying with Founder Funding, which connects you with a network of trusted lenders tailored to your business needs. 6. Submit Your Application Once you’ve chosen a lender, it’s time to submit your application. Be thorough and accurate when filling out the forms, and double-check that you’ve included all required documentation. After submitting your application, be prepared to answer any follow-up questions from the lender. If you apply through Founder Funding, their team can assist you every step of the way, ensuring a smooth and efficient process. 7. Review and Accept the Offer If your application is approved, carefully review the loan offer before accepting it. Pay close attention to the interest rate, repayment schedule, and any additional fees. Make sure the terms align with your business’s financial capabilities and goals. Founder Funding can help you evaluate offers to ensure you’re making the best decision for your business. 8. Use the Funds Wisely Once you’ve secured the loan, use the funds as outlined in your business plan. 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