2026 Section 179 Deduction Limit
For 2026, the Section 179 Deduction Limit is $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 2026-08-29
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
Taxpayers who elect to expense qualifying property under Internal Revenue Code Section 179 for taxable years beginning in calendar year 2026.
What changed this year, and why
For taxable years beginning in 2026, the inflation-adjusted maximum Section 179 expensing deduction is $2,560,000, and the phase-out threshold is $4,090,000.
Common questions
- What is the phase-out threshold for the Section 179 deduction in 2026?
- The phase-out starts once the total cost of Section 179 property placed in service during the tax year exceeds $4,090,000. The $2,560,000 maximum deduction is reduced dollar for dollar by the amount above that threshold, down to 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
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)
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
Heavy sport utility vehicles and certain other passenger vehicles face a separate dollar cap on section 179 expensing that is lower than the general maximum deduction. For vehicles placed in service during tax years beginning in 2025, the amount a taxpayer can elect to expense under section 179 is limited to $31,300. This rule 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 of more than 6,000 pounds but not more than 14,000 pounds. However, the $31,300 limit does not apply to vehicles designed to seat more than nine passengers behind the driver's seat, vehicles equipped with a cargo area of at least six feet in interior length that is not readily accessible from the passenger compartment, or vehicles with an integral enclosure fully enclosing the driver compartment and load carrying device that lack seating rearward of the driver's seat and have no body section protruding more than 30 inches ahead of the windshield.
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. However, the $31,300 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 (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.