2025 Section 179 Deduction Limit
For 2025, the Section 179 Deduction Limit is $2,500,000 (Maximum section 179 expensing deduction) and $4,000,000 (Phase-out threshold: cost of section 179 property placed in service).
Effective 2025-01-01Source: Rev. Proc. 2025-32 (IRS)Verified 2026-08-29
Compared with 2024
| Item | 2024 | 2025 | Change |
|---|---|---|---|
| Maximum section 179 expensing deduction | $1,220,000 | $2,500,000 | +$1,280,000 (+104.9%) |
| Phase-out threshold: cost of section 179 property placed in service | $3,050,000 | $4,000,000 | +$950,000 (+31.1%) |
Who it applies to
Taxpayers who elect to expense qualifying depreciable assets under Internal Revenue Code Section 179
What changed this year, and why
For 2025, the maximum Section 179 expensing deduction is $2,500,000. The phase-out threshold - the cost of Section 179 property placed in service at which the deduction begins to reduce - is $4,000,000. These amounts were set by the OBBBA and apply to property placed in service in taxable years beginning after December 31, 2024. They will be adjusted for inflation for taxable years beginning after December 31, 2025. In 2024, the maximum deduction was $1,220,000 and the phase-out threshold was $3,050,000.
Common questions
- How does the phase-out work?
- The phase-out begins when the total cost of Section 179 property placed in service during the tax year exceeds $4,000,000. The $2,500,000 maximum deduction is reduced dollar for dollar by the amount above that threshold, until it reaches zero.
Every amount on this page is a published figure rather than yours. The Section 179 expensing headroom takes the number you enter and works it out against them, showing which published figure it used.
What counts as section 179 property
Section 179 does not apply to every asset a business owns. Not every asset the business purchases qualifies for immediate expensing. The property must be a specific type of depreciable property - such as tangible personal property, certain other tangible property used in manufacturing or utility services, single-purpose agricultural structures, petroleum storage facilities, off-the-shelf computer software, or qualified section 179 real property. It must be acquired by purchase for use in the active conduct of a trade or business, not for personal or investment purposes. Property received as a gift, inheritance, or tax-free transfer generally does not qualify. The property also must not fall into any of the excluded categories listed separately in the publication, such as property acquired from a related person or property already deducted under another provision. All of these requirements must be satisfied simultaneously; if any one is missing, the property cannot be expensed under section 179 and must instead be recovered through regular depreciation over its applicable recovery period.
To qualify for the section 179 deduction, your property must be one of the following types of depreciable property.
Publication 946 (2025), How To Depreciate Property (IRS)
How buying too much property cuts the deduction
Section 179 allows a business to immediately expense the cost of qualifying property rather than depreciating it over many years. However, the benefit phases out for taxpayers who place very large amounts of property in service during the year. Once the total cost of section 179 property placed in service exceeds the threshold amount, the maximum deduction is reduced dollar for dollar by the excess. The reduction continues until the dollar limit reaches 0, at which point no section 179 deduction is available. If total costs reach the point where the dollar limit is fully phased out, the taxpayer cannot take any section 179 deduction for that year. Taxpayers who anticipate placing large amounts of property in service should plan carefully, because the phase-out can eliminate the deduction entirely if total costs reach the specified level.
If the cost of your qualifying section 179 property placed in service in a year is more than $4,000,000, you must gen- erally reduce the dollar limit (but not below zero) by the amount of cost over $4,000,000.
Publication 946 (2025), How To Depreciate Property (IRS)
The deduction cannot exceed your business income
Even after the dollar limit is determined and any phase-out reduction has been applied, the deduction cannot exceed the taxable income derived from the active conduct of a trade or business during the year. This means that a business with little or no current-year profit may be unable to use the full section 179 deduction in that year. Taxable income for this purpose is computed by totaling the net income and losses from all trades or businesses the taxpayer actively conducted, including section 1231 gains or losses, interest from working capital, and wages or salaries earned as an employee. Importantly, the computation is made without regard to the section 179 deduction itself, the self-employment tax deduction, any net operating loss carryback or carryforward, or unreimbursed employee expenses. Any portion of the cost that cannot be deducted in the current year because of this income limitation is not lost; it is carried forward to the next year under 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.
Publication 946 (2025), How To Depreciate Property (IRS)
Carrying the disallowed part forward, and which property it comes from
When the business income limitation prevents the taxpayer from deducting the full amount of section 179 costs in the current year, the disallowed portion is carried forward to future years. If the taxpayer placed more than one item of property in service during the year, the taxpayer has the ability to choose which specific properties will have their costs carried forward to the next year, rather than having the carryover spread automatically across all properties. This selection must be documented in the taxpayer's books and records. Costs allocated from a partnership or S corporation are treated as a single item of property for this purpose. If the taxpayer does not make an affirmative selection, the total carryover is allocated equally among all properties for which the section 179 election was made in that year. When carryovers from multiple years exist and only a portion can be deducted in a given year, the amounts from the earliest year are applied first.
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 (2025), How To Depreciate Property (IRS)
The separate cap on heavy SUVs
Heavy sport utility vehicles and certain other passenger vehicles receive special treatment under section 179. For vehicles placed in service in tax years beginning in 2025, the portion of the cost that can be immediately expensed under section 179 is capped at a specified dollar amount, regardless of the overall dollar limit that would otherwise apply. This cap applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways that has a gross vehicle weight rating above the minimum threshold but not more than the maximum threshold the publication specifies. The rationale is that these vehicles, while heavy enough to fall outside the luxury automobile depreciation caps, are still primarily passenger vehicles and should not receive the full section 179 benefit available to other types of business property. Certain vehicles are excluded from this separate cap, including those with seating capacity above nine passengers behind the driver, vehicles with cargo areas that meet specific length and accessibility requirements, and vehicles with integral enclosures that fully enclose the driver compartment and load-carrying device with no seating rearward of the driver's seat.
You cannot elect to expense more than $31,300 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service in tax years beginning in 2025. 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 (2025), 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. 2025-32 (IRS)
- Maximum section 179 expensing deduction
Section 179(b)(1) as amended by the OBBBA provides that the maximum amount allowable for expensing under § 179 is $2,500,000 for any taxable year beginning in 2025.
- Phase-out threshold: cost of section 179 property placed in service
Section 179(b)(2) as amended by the OBBBA provides that, for any taxable year beginning in 2025, the $2,500,000 amount is reduced by the amount by which the cost of § 179 property placed in service during the taxable year exceeds $4,000,000, but not below $0.