2023 Section 179 Deduction Limit
For 2023, the Section 179 Deduction Limit figures are $1,160,000 (Maximum section 179 expensing deduction) and $2,890,000 (Phase-out threshold: cost of section 179 property placed in service).
Effective 2023-01-01Source: Rev. Proc. 2022-38 (IRS)Verified 2026-09-02
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Maximum section 179 expensing deduction | $1,080,000 | $1,160,000 | +$80,000 (+7.4%) |
| Phase-out threshold: cost of section 179 property placed in service | $2,700,000 | $2,890,000 | +$190,000 (+7.0%) |
Who it applies to
Taxpayers who elect to expense certain depreciable assets under Section 179 for taxable years beginning in 2023.
What changed this year, and why
For taxable years beginning in 2023, the inflation-adjusted limits under Section 179 are updated.
Common questions
- What is the Section 179 deduction limit for 2023?
- For taxable years beginning in 2023, the maximum Section 179 deduction is $1,160,000. The deduction begins to phase out when the total cost of Section 179 property placed in service during the year exceeds $2,890,000.
- How does the phase-out work?
- The $1,160,000 maximum is reduced dollar for dollar by the amount by which the cost of Section 179 property placed in service during 2023 exceeds $2,890,000. The deduction cannot be reduced below zero.
What counts as section 179 property
For 2023, property can be expensed under section 179 only if it satisfies four separate conditions at the same time. First, the asset must be an eligible type of depreciable property - generally tangible personal property used in a trade or business, certain other tangible property, and specific categories of real property such as qualified improvement property. Second, the property must be acquired for use in the active conduct of a trade or business; property held for investment or personal use does not qualify. Third, the property must have been acquired by purchase - gifts, inheritances, and tax-free exchanges do not count. Fourth, the property must not fall within any of the excluded categories listed by the IRS, such as property used to furnish lodging, property used by a tax-exempt organization, or property owned by a nonresident alien. If any one of these conditions is not met, the cost of the asset cannot be treated as section 179 property and must be recovered through regular depreciation instead.
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 (2023), How To Depreciate Property (IRS)
How buying too much property cuts the deduction
When a taxpayer places qualifying section 179 property into service during 2023 and the total cost of that property exceeds $2,890,000, the dollar limit on the section 179 deduction must be reduced. The reduction works dollar for dollar: for every dollar of cost above the $2,890,000 threshold, the maximum deduction of $1,160,000 is lowered by the same amount. The limit cannot go below zero. Once the total cost of section 179 property placed in service reaches $4,050,000, the entire deduction is eliminated and the taxpayer cannot take any section 179 expense deduction for that year. This phase-out rule applies to the combined cost of all qualifying property placed in service during the tax year, regardless of how many separate assets were purchased. The purpose is to direct the benefit toward smaller-scale investments rather than large capital outlays.
If the cost of your section 179 property placed in service during 2023 is $4,050,000 or more, you cannot take a section 179 deduction.
Publication 946 (2023), How To Depreciate Property (IRS)
The deduction cannot exceed your business income
Even after applying the dollar limit and any phase-out reduction, the section 179 deduction cannot exceed the taxable income generated by the active conduct of a trade or business during the year. This means the deduction is limited to business profits, and any excess amount that would create or increase a business loss cannot be claimed in the current year. Taxable income for this purpose is calculated 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 and interest from business working capital. However, the calculation must be made 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. Any amount disallowed because of this business income limitation is not lost permanently but can be carried forward to future years as explained in the carryover rules.
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. Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the manage- ment or operations of the trade or business. Any cost not deductible in 1 year under section 179 be- cause of this limit can be carried to the next year.
Publication 946 (2023), How To Depreciate Property (IRS)
Carrying the disallowed part forward, and which property it comes from
When a taxpayer places more than one item of section 179 property in service during a tax year but cannot deduct all of the costs due to the business income limitation or other restrictions, the taxpayer has the ability to choose which specific properties will have their costs carried forward to future years. This selection must be documented in the taxpayer's books and records. For property received from partnerships or S corporations, section 179 costs allocated from those entities are treated as a single item of property for purposes of making this selection. If the taxpayer fails to make a specific selection, the IRS requires that the total carryover amount be allocated equally among all properties that were elected for section 179 expensing during the year. When carryover amounts from multiple years exist and only part can be deducted in a subsequent year, the costs from the earliest year must be deducted first before using amounts from later years.
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. Your selections must be shown in your books and records. For this purpose, treat section 179 costs allocated from a partnership or an S corporation as one item of section 179 property. If you do not make a selection, the total carryover will be allocated equally among the properties you elected to expense for the year. If costs from more than 1 year are carried forward to a subsequent year in which only part of the total carryover can be deducted, you must deduct the costs being carried forward from the earliest year first.
Publication 946 (2023), How To Depreciate Property (IRS)
The separate cap on heavy SUVs
Heavy sport utility vehicles and certain other vehicles face a separate, much lower expensing limit than other qualifying property. For vehicles placed in service in tax years beginning in 2023, the maximum amount that can be elected for expensing is $28,900, regardless of the vehicle's actual cost. This cap applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways that has a gross vehicle weight rating of more than 6,000 pounds but not more than 14,000 pounds. However, certain vehicles are exempt from this $28,900 limitation and can qualify for the full $1,160,000 deduction if they meet other requirements. Exempt vehicles include passenger vans designed to seat a large number of passengers behind the driver, vehicles equipped with a substantial cargo area not readily accessible from the passenger compartment, and enclosed work vehicles that fully enclose the driver compartment and load-carrying device with no rear seating. The weight range is key: vehicles at or below 6,000 pounds are depreciated normally, while those over 14,000 pounds fall outside this rule entirely.
You cannot elect to expense more than $28,900 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service in tax years beginning in 2023. 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.
Publication 946 (2023), How To Depreciate Property (IRS)
Estates and trusts are shut out of this deduction entirely
Under federal tax rules for 2023, estates and trusts are not permitted to claim the section 179 deduction. This means that if property is held by an estate or trust, it cannot elect to expense the cost of qualifying property under section 179, even if the property would otherwise meet all the requirements. The deduction is only available to taxpayers operating a trade or business as individuals, partnerships, corporations, or other eligible entity types. Estates and trusts must instead recover the cost of qualifying property through regular depreciation deductions over the property's recovery period, rather than taking an immediate expense deduction in the year the property is placed in service.
Estates and trusts cannot elect the section 179 deduction.
Publication 946 (2023), How To Depreciate Property (IRS)
The deduction lands in the year the property is placed in service, not when you paid for it
For 2023, the section 179 deduction is timed to the year the property is placed in service, not the year you paid for it. This means you claim the deduction in the tax year when the property is ready and available for use in your trade or business, regardless of when you actually purchased it or paid for it. The maximum section 179 expensing deduction for 2023 is $1,160,000, but this amount begins to phase out when the total cost of section 179 property placed in service during the year exceeds $2,890,000. You can elect to take the section 179 deduction instead of recovering the cost through regular depreciation deductions over multiple years.
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 (2023), How To Depreciate Property (IRS)
The election is made by filling out Part I of Form 4562
To elect the section 179 deduction for 2023, you must complete Part I of Form 4562. This form is filed with your tax return for the year the property is placed in service. If you are electing the deduction for listed property, you must also complete Part V of Form 4562 before completing Part I. The maximum section 179 expensing deduction for 2023 is $1,160,000, subject to phase-out rules when the cost of section 179 property placed in service exceeds $2,890,000. You can file Form 4562 with your original 2023 tax return, whether or not you file it timely, or with an amended return for 2023.
Election. You elect to take the section 179 deduction by completing Part I of Form 4562.
Publication 946 (2023), How To Depreciate Property (IRS)
When another deduction also caps out at taxable income, the two have to be worked out together
When calculating the section 179 deduction for 2023, you may encounter situations where multiple deductions are subject to taxable income limitations. In addition to the business income limit that applies to the section 179 deduction itself, you may have a taxable income limit for another deduction. When this occurs, you must figure the limit for the other deduction by taking into account the section 179 deduction. The process involves first figuring taxable income without either the section 179 deduction or the other deduction, then calculating a hypothetical section 179 deduction. The maximum section 179 expensing deduction is $1,160,000, with phase-out beginning when section 179 property placed in service exceeds $2,890,000.
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 (2023), 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 for property drops to 50% or less in any year during the property's recovery period, you must recapture part of the section 179 deduction. In the year the business use falls to this threshold, you include the recapture amount as ordinary income on Part IV of Form 4797. You also increase the property's basis by the recapture amount. This rule applies to section 1245 property, but different rules apply for listed property. The recapture ensures that the deduction claimed under section 179 is adjusted downward when the property is no longer used predominantly for business purposes. The maximum section 179 expensing deduction for 2023 is $1,160,000, subject to phase-out when section 179 property placed in service exceeds $2,890,000.
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 (2023), 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. 2022-38 (IRS)
- Maximum section 179 expensing deduction
Election to Expense Certain Depreciable Assets. For taxable years beginning in 2023, under § 179(b)(1), the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $1,160,000
- Phase-out threshold: cost of section 179 property placed in service
Under § 179(b)(2), the $1,160,000 limitation under § 179(b)(1) is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2023 taxable year exceeds $2,890,000.