How it works
Section 179 lets a business deduct the full cost of qualifying equipment in the year it is placed in service, instead of spreading the deduction across years of depreciation — and this calculator shows what that is worth. Enter the equipment cost and your marginal tax rate, and it reports the year-one deduction (capped at roughly $1.22 million for 2026 planning purposes), the tax that saves immediately, and the effective cost of the equipment after the saving. It also shows the alternative: the thin first-year slice straight-line depreciation would have given, and the year-one advantage of taking it all now. A $50,000 machine at a 24% bracket is a $50,000 deduction saving $12,000 at once, against $10,000 a year under five-year straight-line. Crucially, the total deduction is identical either way — Section 179 only moves it into year one, which is a cash-flow and time-value win, not extra money. Two limits keep it honest: the deduction cannot exceed your taxable business income for the year, so it cannot create a loss, and vehicles carry separate, much lower caps. Confirm the current limits before a large purchase.
Formula
Deduction = min(cost, cap) | tax saved = deduction x marginal rate
Tips
- Section 179 moves the whole deduction into year one — a cash-flow win, not extra money.
- It cannot exceed taxable business income, so it cannot create a loss.
- Vehicles carry separate, much lower caps than equipment.
- The roughly $1.22M cap is a 2026 planning figure — confirm before a big purchase.
- Compare against straight-line to see the time-value advantage, not just the total.
Frequently asked questions
- What is the Section 179 deduction?
- A provision letting a business deduct the full cost of qualifying equipment in the year it is placed in service, rather than depreciating it over years. A $50,000 machine at a 24% bracket saves $12,000 immediately instead of $2,400 a year for five years.
- What is the Section 179 limit?
- Roughly $1.22 million for 2026 planning purposes, with a phase-out once total equipment purchases exceed a higher threshold. Vehicles carry separate, much lower caps. These figures adjust for inflation, so confirm the current limits before a large purchase.
- Does Section 179 save money or just move it?
- It moves it. The total deduction is the same whether you take it now or depreciate over years — Section 179 only accelerates it into year one. That is a genuine cash-flow and time-value advantage, but it is not a larger total deduction.
- Can Section 179 create a business loss?
- No — the deduction is limited to your taxable business income for the year. Any excess carries forward to future years. If you want to create a loss, bonus depreciation rather than Section 179 is the mechanism, under its own rules.
- What equipment qualifies for Section 179?
- Tangible business property — machinery, computers, office furniture, off-the-shelf software and certain vehicles — bought for business use more than half the time and placed in service that year. Buildings and land do not qualify, though some improvements do.