Section 179 Calculator

Section 179 Calculator

How to Use the Section 179 Calculator

1. 1

   Enter the cost

   Type the total cost of the qualifying equipment and off-the-shelf software you placed in service in 2026.

2. 2

   Set the business-use percentage

   Enter how much of the property's use is for business. It must be more than 50% to qualify; 100% is the default.

3. 3

   Add business taxable income

   Enter your business taxable income before Section 179. Leave it blank if it is comfortably larger than the deduction and you want to skip the income limit.

4. 4

   Choose a marginal tax rate

   Pick C corporation for 21%, an individual bracket if the deduction flows to your personal return, or enter your own combined federal and state rate.

5. 5

   Review the results

   Results update as you type: the deduction, carryforward, remaining basis, tax savings and a step-by-step breakdown of the limits.

How the Section 179 calculation works

Section 179 of the Internal Revenue Code lets you elect to deduct the cost of qualifying property as an expense in the year it is placed in service, instead of depreciating it over several years. You make the election on Form 4562. For the 2026 tax year the maximum deduction is $2,560,000, as set by IRS Rev. Proc. 2025-32 under the limits in the One, Big, Beautiful Bill Act.

Three limits apply in order. First, only the business-use share of the cost counts, and business use must exceed 50%. Second, the $2,560,000 limit falls dollar for dollar once the property you place in service in the year passes $4,090,000, so it reaches zero at $6,650,000. Third, the deduction cannot exceed taxable income from the active conduct of your trades or businesses; the excess carries forward to later years. Your depreciable basis is reduced by the full amount you elect, including any carryforward.

Business basis = cost × business-use %
Dollar limit = $2,560,000 − max(0, business basis − $4,090,000)
Amount elected = min(business basis, dollar limit)
Deduction = min(amount elected, business taxable income)
Carryforward = amount elected − deduction
Tax savings = deduction × marginal rate

Worked examples

Example 1: a C corporation buys $250,000 of machinery, used 100% for business, but has only $90,000 of business taxable income. It can elect $250,000, but the income limit caps the 2026 deduction at $90,000. The other $160,000 carries forward, and at 21% the deduction saves $18,900 this year. In a case like this, electing less Section 179 and using bonus depreciation for the rest may work better, because bonus depreciation has no income limit.

Example 2: a sole proprietor in the 24% bracket buys a $150,000 piece of equipment used 80% for business, with $400,000 of business income. The business basis is $120,000, all of it deductible, saving an estimated $28,800 of federal income tax. The $30,000 personal share is not deductible.

Example 3: a company places $4,500,000 of property in service. That is $410,000 over the phase-out threshold, so the limit drops to $2,150,000. With enough income it deducts $2,150,000, saving $451,500 at 21%, and $2,350,000 of basis remains for bonus or regular depreciation.

2026 Section 179 limit and phase-out

The table assumes 100% business use and enough business income, computed with the same logic as the calculator. Savings use the 21% corporate rate.

Section 179 vs bonus depreciation

Bonus depreciation is a separate first-year write-off. The One, Big, Beautiful Bill Act restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, so for many purchases in 2026 either method can deduct the full cost. The differences matter: bonus depreciation has no dollar limit and no business income limit, so it can create a net operating loss; it applies automatically to each class of property unless you elect out; and Section 179 lets you choose asset by asset how much to expense.

The two can be combined: Section 179 is applied first, then bonus depreciation on the remaining basis, then regular MACRS depreciation. Some states do not follow federal bonus depreciation or cap Section 179, so your state deduction can differ. Rules for specific assets and acquisition dates are detailed, so confirm the approach with a tax professional.

What qualifies, and recapture

• Qualifying property includes machinery and equipment, business vehicles, computers, furniture and off-the-shelf software, new or used, as long as it is new to you and bought from an unrelated party.
• Certain improvements to nonresidential buildings can also qualify, such as roofs, HVAC, fire protection, alarm and security systems, and qualified improvement property on interiors.
• Property must be placed in service, meaning ready and available for use, during 2026. Buying in December and installing in January moves the deduction to the next year.
• Heavy SUVs have a separate, lower Section 179 cap, and passenger cars are subject to luxury auto depreciation limits.
• Recapture: if business use of the property drops to 50% or less in a later year of its recovery period, you must add back to income the part of the Section 179 deduction that exceeds the depreciation you would otherwise have taken, reported on Form 4797. Selling the property early can also trigger recapture.

Legal tax-planning strategies for businesses

Section 179 is one of several legal ways to manage business taxes. Keep records that support every claim; these are planning tools, not loopholes.

• Timing: buy and place needed equipment in service before year end to pull the deduction into a high-income year, or wait if next year's rate or income will be higher. Do not buy assets you do not need just for a deduction.
• Mix Section 179 and bonus depreciation: use Section 179 where you want precise control and bonus depreciation where income is too low for Section 179.
• Research credit and R&E expensing: the Section 41 credit rewards qualified research, and domestic research and experimental costs can again be deducted when paid for tax years beginning after 2024.
• Retirement plan contributions for employees and owners are deductible within plan limits.
• Charitable giving: C corporations can generally deduct gifts up to 10% of taxable income, and from 2026 only giving above 1% of taxable income counts.
• Choice of entity and state credits: compare C corporation and pass-through treatment, and look for state investment, hiring or research credits. S corporation owners must pay themselves reasonable compensation, which the IRS reviews closely.

Features

• 2026 Section 179 dollar limit and dollar-for-dollar phase-out
• Business-use percentage with the more-than-50% test
• Business income limit with the carryforward amount
• Remaining depreciable basis after Section 179
• Tax savings at the 21% corporate rate, an individual bracket or your own rate

Frequently Asked Questions