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:
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.