2021 Section 179 Deduction Limit
For 2021, the Section 179 Deduction Limit figures are $1,050,000 (Maximum section 179 expensing deduction) and $2,620,000 (Phase-out threshold: cost of section 179 property placed in service).
Effective 2021-01-01Source: Rev. Proc. 2020-45 (IRS)Verified 2026-09-03
Compared with 2020
| Item | 2020 | 2021 | Change |
|---|---|---|---|
| Maximum section 179 expensing deduction | $1,040,000 | $1,050,000 | +$10,000 (+1.0%) |
| Phase-out threshold: cost of section 179 property placed in service | $2,590,000 | $2,620,000 | +$30,000 (+1.2%) |
Who it applies to
Businesses that elect to expense the cost of qualifying depreciable property (Section 179 property) placed in service during taxable years beginning in 2021.
What changed this year, and why
For taxable years beginning in 2021, the IRS has announced the inflation-adjusted limits for the Section 179 expensing deduction under § 179(b)(1) and the phase-out threshold under § 179(b)(2).
Common questions
- What is the maximum Section 179 deduction for 2021?
- For taxable years beginning in 2021, the maximum Section 179 expensing deduction is $1,050,000.
- At what point does the Section 179 deduction begin to phase out?
- The $1,050,000 limit is reduced dollar for dollar by the amount by which the cost of Section 179 property placed in service during the 2021 taxable year exceeds $2,620,000. The deduction cannot be reduced below zero.
What counts as section 179 property
This rule sets out the four gates every asset must pass before a taxpayer can expense it under section 179. First, the asset must be a type of eligible depreciable property, such as tangible personal property, certain other tangible property used in manufacturing or utilities, single-purpose agricultural structures, petroleum storage facilities, off-the-shelf computer software, or qualified section 179 real property. Second, it must be acquired for use in the taxpayer's trade or business, not for personal or investment purposes. Third, it must have been acquired by purchase, so property received as a gift, inheritance, or tax-free exchange does not qualify. Fourth, it must not fall into any of the categories listed later in the publication as excluded, such as property used for lodging, air conditioners, or property acquired from a spouse. All four conditions must be met at the same time; failing any one of them disqualifies the asset from the section 179 election entirely.
To qualify for the section 179 deduction, your property must meet all the following requirements. • It must be eligible property. • It must be acquired for business use. • It must have been acquired by purchase. • It must not be property described later under What Property Does Not Qualify.
Publication 946 (2021), How To Depreciate Property (IRS)
How buying too much property cuts the deduction
When a taxpayer places a large amount of section 179 property in service during the year, the maximum deduction is not a flat $1,050,000. Instead, once the total cost of qualifying section 179 property placed in service during 2021 exceeds $2,620,000, the dollar limit must be reduced dollar for dollar by the amount of cost above that threshold. So if total qualifying cost is only slightly above $2,620,000, the reduction is small and most of the $1,050,000 limit remains available. As total cost climbs, the reduction grows at the same rate, and once the excess over $2,620,000 equals the full dollar limit, the limit is reduced all the way to zero and no section 179 deduction is available at all. The reduction is applied to the total cost of all section 179 property placed in service during the year, not to each item separately, and it cannot drive the limit below zero. Married taxpayers filing separate returns share a single $2,620,000 threshold and must allocate the remaining dollar limit between them unless they elect a different allocation. This phase-out ensures that the immediate-expensing benefit is directed toward small and mid-size investments rather than very large capital outlays.
If the cost of your qualifying section 179 property placed in service in a year is more than $2,620,000, you must gen- erally reduce the dollar limit (but not below zero) by the amount of cost over $2,620,000.
Publication 946 (2021), How To Depreciate Property (IRS)
The deduction cannot exceed your business income
Even after a taxpayer has determined the maximum dollar amount available under section 179, the actual deduction cannot exceed the taxable income generated by the active conduct of any trade or business during the year. This means the deduction is tied to how much the business actually earns, not merely to how much qualifying property was purchased. Taxable income for this purpose is figured by totaling the net income and losses from all trades or businesses the taxpayer actively conducted during the year, including section 1231 gains or losses, interest from working capital, and wages or salary earned as an employee. However, the computation is done without regard to the section 179 deduction itself, the self-employment tax deduction, any net operating loss carryback or carryforward, and unreimbursed employee business expenses. If the section 179 costs exceed the business income limit in a given year, the disallowed portion is not lost; it is carried forward to the next year and treated as a section 179 deduction in that later year, subject again to the dollar and income limits then in effect. This rule prevents taxpayers from using section 179 to create or increase a business net operating loss.
The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the ac- tive conduct of any trade or business during the year.
Publication 946 (2021), How To Depreciate Property (IRS)
Carrying the disallowed part forward, and which property it comes from
When a taxpayer's section 179 costs for a year exceed the business income limit, the disallowed portion does not disappear; instead it is carried forward to the next tax year and treated as a section 179 deduction in that later year. If more than one item of section 179 property was placed in service during the year, the taxpayer has the right to choose which specific properties will bear the carryforward. This selection must be reflected in the taxpayer's books and records. For this purpose, any section 179 costs allocated from a partnership or S corporation are treated as a single item of property rather than being split up. If the taxpayer does not make a selection, the total carryover is allocated equally among all the properties that were elected to expense for the year. When carryovers exist from more than one prior year, the taxpayer must apply the oldest carryover first before using amounts from later years. If the property is sold or otherwise disposed of before the carryover is fully used, neither the original taxpayer nor the new owner may deduct the remaining unused amount; instead it must be added back to the property's basis.
If you place more than one property in service in a year, you can select the properties for which all or a part of the costs will be carried forward.
Publication 946 (2021), How To Depreciate Property (IRS)
The separate cap on heavy SUVs
Buy a heavy SUV and the election stops at $26,200 for that vehicle, whatever it cost and however much of the $1,050,000 overall limit is still unused. The rest of the price is not lost, but it comes back slowly through ordinary depreciation instead of in the year of purchase. The cap is aimed at a narrow band: a four-wheeled vehicle built mainly to carry people on public roads and rated between 6,000 and 14,000 pounds gross vehicle weight. Below that band and above it the cap does not apply. Within it, three body styles are let out, on the reasoning that they are working vehicles rather than passenger cars: seating for more than nine people behind the driver, a cargo area of at least 6 feet inside that cannot be reached from where the passengers sit, and a cab design with no seats behind the driver and no bodywork projecting more than 30 inches past the windshield. That middle exception is the one that decides most pickups: a bed under 6 feet leaves the truck capped, and a full-length bed takes it out of the cap altogether. For tax years beginning in 2021 those are the terms, so the planning question is the vehicle's weight rating and body, not its price.
You cannot elect to expense more than $26,200 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service in tax years beginning in 2021. This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. However, the $26,200 limit does not apply to any vehicle: • Designed to seat more than nine passengers behind the driver's seat; • Equipped with a cargo area (either open or enclosed by a cap) of at least 6 feet in interior length that is not readily accessible from the passenger compartment; or • That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.
Publication 946 (2021), How To Depreciate Property (IRS)
Estates and trusts are shut out of this deduction entirely
The section 179 deduction is available to individuals and businesses that actively conduct a trade or business, but estates and trusts are expressly excluded. No estate or trust may make the election to expense qualifying property under section 179, regardless of the amount or type of property placed in service. If you are the beneficiary of an estate or trust that acquired property, you cannot claim the section 179 deduction through that entity. The deduction belongs only to eligible taxpayers such as sole proprietors, partnerships, and corporations that file their own returns. In 2021, the maximum section 179 expensing deduction is $1,050,000, and the phase-out threshold begins when the cost of section 179 property placed in service exceeds $2,620,000, but none of these dollar limits matter to estates and trusts because they cannot elect the deduction at all.
Estates and trusts cannot elect the section 179 deduction.
Publication 946 (2021), How To Depreciate Property (IRS)
The deduction lands in the year the property is placed in service, not when you paid for it
The section 179 deduction is timed to the year you place the property in service, not the year you paid for it. You elect to recover all or part of the cost of qualifying property, up to the applicable limit, by deducting it in the year the property is actually placed in service. This means the deduction lands in the tax year when the property is ready and available for its specific use in your trade or business, regardless of when the purchase was made or paid for. For 2021, the maximum section 179 expensing deduction is $1,050,000, and the phase-out threshold begins when the cost of section 179 property placed in service exceeds $2,620,000. These limits apply to property placed in service during the 2021 tax year. If you purchased property in 2020 but did not place it in service until 2021, the deduction would be claimed on your 2021 return, subject to the 2021 limits.
You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service.
Publication 946 (2021), How To Depreciate Property (IRS)
The election is made by filling out Part I of Form 4562
The election to claim the section 179 deduction is made by completing Part I of Form 4562. This is the formal mechanism for choosing to expense qualifying property rather than recovering its cost through regular depreciation deductions over multiple years. If you elect the deduction for listed property, you must complete Part V of Form 4562 before completing Part I. For property placed in service in 2021, you file Form 4562 with either your original 2021 tax return or an amended return filed within the prescribed time period. In 2021, the maximum section 179 expensing deduction is $1,050,000, and the phase-out threshold begins when the cost of section 179 property placed in service exceeds $2,620,000. The election is irrevocable without IRS consent, so taxpayers should carefully consider which property to designate for section 179 expensing before filing Form 4562.
You elect to take the section 179 deduction by completing Part I of Form 4562.
Publication 946 (2021), How To Depreciate Property (IRS)
When another deduction also caps out at taxable income, the two have to be worked out together
When you have a section 179 deduction and another deduction that is also limited by taxable income, the two limits must be coordinated. You may have to figure the limit for the other deduction by taking into account the section 179 deduction. The IRS provides a step-by-step procedure to work through this coordination. First, you figure taxable income without the section 179 deduction or the other deduction. Then you figure a hypothetical section 179 deduction and use that amount to determine the taxable income limit for the other deduction. This ensures that both deductions are calculated correctly without one artificially inflating the taxable income available for the other. In 2021, the maximum section 179 expensing deduction is $1,050,000, and the phase-out threshold begins when the cost of section 179 property placed in service exceeds $2,620,000, but the actual deduction you can claim may be further limited by these taxable income coordination rules.
Two different taxable income limits. In addition to the business income limit for your section 179 deduction, you may have a taxable income limit for some other deduction.
Publication 946 (2021), How To Depreciate Property (IRS)
If business use falls to 50% or less, part of the deduction comes back as income
If the percentage of business use of section 179 property drops to 50% or less in any year during the property's recovery period, you may have to recapture part of the deduction. In the year the business use drops to this threshold, you include the recapture amount as ordinary income on Part IV of Form 4797. You also increase the basis of the property by the recapture amount. The recapture amount represents the difference between the section 179 deduction you claimed and the depreciation that would have been allowable had you not elected section 179 treatment. For listed property, different recapture rules apply under chapter 5. In 2021, the maximum section 179 expensing deduction is $1,050,000, and the phase-out threshold begins when the cost of section 179 property placed in service exceeds $2,620,000, but these limits do not affect the recapture calculation, which is based on actual use of the property during the recovery period.
You may have to recapture the section 179 deduction if, in any year during the property's recovery period, the per- centage of business use drops to 50% or less.
Publication 946 (2021), How To Depreciate Property (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Rev. Proc. 2020-45 (IRS)
- Maximum section 179 expensing deduction
Election to Expense Certain Depreciable Assets. For taxable years beginning in 2021, under § 179(b)(1), the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $1,050,000
- Phase-out threshold: cost of section 179 property placed in service
Under § 179(b)(2), the $1,050,000 limitation under section 179(b)(1) is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2021 taxable year exceeds $2,620,000.