2026 Section 179 Deduction Limit
For 2026, the Section 179 Deduction Limit figures are $2,560,000 (Maximum section 179 expensing deduction) and $4,090,000 (Phase-out threshold: cost of section 179 property placed in service).
Effective 2026-01-01Source: Rev. Proc. 2025-32 (IRS)Verified 2026-09-03
Compared with 2025
| Item | 2025 | 2026 | Change |
|---|---|---|---|
| Maximum section 179 expensing deduction | $2,500,000 | $2,560,000 | +$60,000 (+2.4%) |
| Phase-out threshold: cost of section 179 property placed in service | $4,000,000 | $4,090,000 | +$90,000 (+2.3%) |
Who it applies to
Businesses that elect to expense qualifying depreciable property under Internal Revenue Code Section 179 for taxable years beginning in 2026.
What changed this year, and why
For taxable years beginning in 2026, the maximum Section 179 expensing deduction is $2,560,000 and the phase-out threshold is $4,090,000, both increased from 2025 amounts due to inflation adjustments.
Common questions
- What is the Section 179 deduction?
- Section 179 lets a business deduct the full cost of qualifying property in the year it is placed in service, rather than depreciating it over multiple years. The deduction is subject to a dollar cap and phases out once a business places enough property in service during the year.
- How does the phase-out work?
- The $2,560,000 maximum is reduced dollar for dollar once the total cost of Section 179 property placed in service exceeds $4,090,000 during the taxable year.
- How do the 2026 amounts compare to 2025?
- For 2025, the maximum deduction was $2,500,000 and the phase-out threshold was $4,000,000.
Every amount on this page is a published figure rather than yours. The Section 179 expensing after the phase-down takes the number you enter and works it out against them, showing which published figure it used.
What counts as section 179 property
To be expensed immediately under section 179, property must satisfy every one of four conditions. First, it must be eligible property, which generally means depreciable tangible personal property, certain other tangible property used in manufacturing or utility services, single-purpose agricultural or horticultural structures, petroleum storage facilities, off-the-shelf computer software, or qualified section 179 real property. Second, it must be acquired for use in an active trade or business; property held for investment or personal use does not qualify. Third, it must be acquired by purchase, so property received as a gift, through inheritance, or in a tax-free exchange is excluded. Fourth, it must not fall within the categories the statute specifically disqualifies, such as property used to furnish lodging or property owned by a person who is not engaged in a trade or business. A taxpayer who places qualifying property in service during the year may elect to expense its cost up to the annual maximum, which for 2026 is $2,560,000, subject to reduction once total qualifying purchases exceed $4,090,000.
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. 4562 4797 • It must not be property described later under What Property Does Not Qualify.
Publication 946 (2025), How To Depreciate Property (IRS)
How buying too much property cuts the deduction
For 2026, the maximum section 179 expensing deduction is $2,560,000, but that amount is reduced dollar for dollar once the total cost of section 179 property you place in service during the year exceeds $4,090,000. Every dollar of cost above that threshold cuts the available deduction by a dollar, and the reduction cannot push the limit below zero. In practice this means that once the cost of property placed in service reaches the level where the excess equals the full maximum deduction, no section 179 expensing is available at all for that year. The phase-out is based on the total cost of all qualifying property placed in service, regardless of when it was purchased, so the date the asset is actually ready for use is what matters, not the date you signed the purchase agreement. Taxpayers who expect total additions to approach or exceed the threshold should track accumulated cost carefully, because even small amounts over the threshold begin to erode the deduction.
This limit is reduced by the amount by which the cost of section 179 property placed in serv- ice during the tax year exceeds $4,090,000.
Publication 946 (2025), How To Depreciate Property (IRS)
The deduction cannot exceed your business income
Even after calculating the maximum section 179 deduction and reducing it for any investment over the phase-out threshold, the amount actually deductible in a given year cannot exceed the taxpayer's taxable income from actively conducting a trade or business. Taxable income for this purpose includes net income or loss from all trades or businesses the taxpayer meaningfully manages, section 1231 gains or losses, interest from working capital, and wages or salary earned as an employee. However, taxable income must be calculated without subtracting the section 179 deduction itself, without any self-employment tax deduction, without any net operating loss carryback or carryforward, and without unreimbursed employee expenses. If business income falls short of the computed deduction limit, the shortfall cannot be carried back to prior years but instead carries forward indefinitely to future years until it can be used, subject to the same business income test in each succeeding year.
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 section 179 costs cannot be deducted in the current year because they exceed the business income limitation, those disallowed amounts carry forward to the next tax year. If a taxpayer places multiple items of qualifying property in service during a single year, the taxpayer has the option to choose which specific properties will have their costs carried forward. This selection must be documented in the taxpayer's books and records to support the treatment on the tax return. Costs allocated from a partnership or S corporation are treated as a single item of section 179 property for purposes of making this election. If the taxpayer fails to make a specific selection, the disallowed costs are allocated equally among all the properties that were elected for section 179 expensing that year. When carryovers from multiple years exist and only part can be deducted in a subsequent year, the oldest disallowed costs must be used first before any newer amounts.
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
For tax years beginning in 2026, the maximum section 179 expense deduction that can be claimed for a sport utility vehicle placed in service during the year is $32,000. This cap applies separately from the overall section 179 deduction limit of $2,560,000. In other words, even if a business has not yet used up its full $2,560,000 allowance, the amount expensed for a heavy SUV cannot exceed $32,000 in 2026. The cap is part of the broader section 179 framework, which also reduces the overall deduction once the cost of section 179 property placed in service during the year exceeds $4,090,000.
Also, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years begin- ning in 2026 is $32,000.
Publication 946 (2025), How To Depreciate Property (IRS)
Estates and trusts are shut out of this deduction entirely
Under federal tax law, estates and trusts are not permitted to claim the section 179 expensing deduction at all. The election to expense qualifying property is available only to individuals, partnerships, corporations, and other taxpayers that actively conduct a trade or business. An estate or trust that holds income-producing property cannot write off the cost of that property under section 179 in the year it is placed in service, even if the property would otherwise meet every eligibility requirement. Instead, the estate or trust must recover the cost of the property through regular depreciation deductions over the applicable recovery period. This rule applies regardless of the amount of the property's cost or the income the estate or trust earns from the business. Taxpayers who are beneficiaries of an estate or trust should not expect the fiduciary to pass through a section 179 deduction, because the deduction simply does not exist at the entity level for these types of taxpayers.
Caution: Estates and trusts cannot elect the section 179 deduction.
Publication 946 (2025), 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 taken in the tax year the property is placed in service, meaning the year it is ready and available for its specific use in your trade or business. It does not matter when you paid for the property, signed the purchase agreement, or took title to it. If you buy equipment in December of one year but do not install and begin using it until January of the following year, the section 179 election applies to that later year. This timing rule means that the deduction follows actual use, not cash flow or contractual commitments. Taxpayers should track the date each asset becomes operational, because that date determines which tax year's dollar limits and phase-out thresholds apply to the election. The same placed-in-service rule governs when depreciation begins, so the section 179 deduction and any remaining depreciation both start in the same year.
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 (2025), How To Depreciate Property (IRS)
The election is made by filling out Part I of Form 4562
To claim the section 179 deduction, you must make the election by completing Part I of Form 4562, Depreciation and Amortization. The form is attached to your tax return for the year the property is placed in service. If any of the property you are expensing is listed property, such as certain vehicles or equipment used for both business and personal purposes, you must first complete Part V of Form 4562 before filling out Part I. The election can be made on your original return, whether filed timely or on extension, or on an amended return filed within the time prescribed by law. Once the election is made on a timely filed return, it is generally irrevocable, meaning you cannot later change your mind and switch to regular depreciation for that property. Each item of property you choose to expense must be specifically identified on the form.
You elect to take the section 179 deduction by completing Part I of Form 4562.
Publication 946 (2025), How To Depreciate Property (IRS)
When another deduction also caps out at taxable income, the two have to be worked out together
When you figure your section 179 deduction, two separate limits may apply: the business income limit and one or more other deductions that are also capped at taxable income. If another deduction you are claiming is limited by taxable income, the two limits interact and must be computed in a specific order. First, figure your taxable income without either the section 179 deduction or the other deduction. Then calculate a hypothetical section 179 deduction using that taxable income. Subtract that hypothetical section 179 amount from the taxable income to get a reduced figure. Use that reduced amount to compute the other deduction. This coordination ensures that neither deduction artificially inflates the taxable income available to support the other. The section 179 deduction itself is also subject to the business income limit, so the final allowable amount may be smaller than the dollar limit after both constraints are applied.
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. You may have to figure the limit for this other deduction taking into account the section 179 deduction.
Publication 946 (2025), 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 on which you claimed a section 179 deduction falls to 50% or less in any year during the property's recovery period, you must recapture part of the deduction. The recapture amount is included as ordinary income on Part IV of Form 4797 in the year the drop occurs. You also increase the property's basis by the recapture amount, which affects any future gain or loss on disposition. The recapture rules apply throughout the entire recovery period, not just in the year the deduction was taken, so even property that has been in service for several years can trigger recapture if business use declines. Note that different rules apply to listed property when business use drops below the threshold, and special rules govern recapture on sale or exchange of the property, so the general recapture calculation discussed here does not apply in those situations.
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 (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
Election to Expense Certain Depreciable Assets. For taxable years beginning in 2026, under § 179(b)(1), the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $2,560,000
- Phase-out threshold: cost of section 179 property placed in service
Under § 179(b)(2), the $2,560,000 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 2026 taxable year exceeds $4,090,000.
