Quick answer: Section 179 lets businesses immediately deduct the full cost of qualifying equipment, machinery, vehicles, and software in the year of purchase instead of depreciating it over 5–7 years. The 2024 limit is $1,220,000, with a phase-out starting at $3,050,000 in total purchases. At a 37% tax rate, a $100,000 equipment purchase generates a $37,000 immediate tax savings versus $5,000–$7,000 per year under standard depreciation.
What Qualifies for Section 179
Qualifying property includes: tangible personal property (machinery, equipment, computers, office furniture), off-the-shelf software, certain vehicles used for business (SUVs over 6,000 lbs GVW have a separate $30,500 cap in 2024), and qualified improvement property (interior improvements to nonresidential buildings). Real property — land, buildings, structural components — does not qualify. The equipment must be placed in service during the tax year you're claiming the deduction, and you must use it more than 50% for business. If business use drops below 50% in a later year, you may have to recapture some of the deduction.
Section 179 vs. Bonus Depreciation
Bonus depreciation (currently 60% for 2024, phasing down from 100%) allows a similar immediate deduction but with key differences: Section 179 is limited to your taxable business income for the year — you can't create a net operating loss with it. Bonus depreciation has no such limit and can generate a loss that carries forward. Bonus depreciation applies to new and used property; Section 179 always has. Many businesses use both: Section 179 first up to the income limit, then bonus depreciation for any remaining basis. Your CPA can model which combination maximizes your current-year deduction and manages future depreciation recapture.
Vehicles and the Heavy SUV Loophole
Passenger vehicles have luxury auto depreciation limits that cap the deduction at around $12,400 in year one (2024). But SUVs, trucks, and vans with a Gross Vehicle Weight Rating (GVWR) over 6,000 pounds qualify for more aggressive expensing. Vehicles over 6,000 GVW used more than 50% for business can use Section 179 (up to $30,500 for SUVs in 2024) plus bonus depreciation on the remainder. At 100% business use, a $80,000 qualifying SUV could generate a first-year deduction of $48,000+. Document business use carefully — the IRS requires mileage logs for vehicle deductions.
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