Section 179 Expensing Explained: Maximize Deductions on Your Equipment Purchases

Investing in new equipment—whether it’s a delivery van, production machinery, or computer systems—can feel like a major cash outlay. As an Ohio business owner, we’ve seen firsthand how Section 179 can turn that expense into a powerful tax deduction, keeping dollars in your pocket right when you need them. Here’s what you need to know to take full advantage of this provision.

What Is Section 179?

Section 179 of the IRS Code allows you to deduct the full cost of qualifying tangible property in the year you place it into service, rather than spreading depreciation over several years. For 2024, the maximum deduction limit is $1,160,000, phasing out on equipment purchases above $2,890,000. That means most small and mid‑sized businesses can write off 100% of their equipment investment immediately.

Qualifying Property and Eligibility

To qualify, the equipment must be purchased (not leased) and used more than 50% for business purposes. Eligible items include:

Machinery and manufacturing equipment
Office furniture and fixtures
Computers, software, and communication devices
Certain vehicles (subject to luxury auto limits)

You can even include off‑the‑shelf software and improvements to nonresidential property, like HVAC upgrades or fire suppression systems.

Section 179 vs. Bonus Depreciation

While Section 179 lets you elect the deduction up to the annual limit, bonus depreciation applies automatically to new and used property through 2026. Bonus depreciation is currently 80%, stepping down over time, whereas Section 179 covers 100% (up to limits) and lets you exclude specific assets if you exceed the overall cap. A blended strategy often yields the best outcome.

How to Plan Your Purchase

Review your year‑to‑date income. Section 179 deductions can’t exceed taxable business income. If your profits are modest this year, you may carry forward excess deductions.
Time acquisitions strategically. Placing equipment in service before December 31 ensures you capture the full deduction for the current tax year.
Compare purchase vs. lease. In some cases, leasing delivers lower upfront costs but doesn’t qualify for Section 179. Our analysis showed that buying the delivery van outright and using Section 179 provided a larger immediate tax benefit than leasing—once we factored in interest and residual value. Learn more about balancing leasing versus buy a vehicle here.
Coordinate with your accountant. Accurate asset tracking and timely elections are crucial. We handle the Form 4562 preparation and ensure your depreciation schedule aligns with overall tax-planning goals through our tax preparation services.

Real‑World Example

Imagine you purchase $200,000 of equipment in October. Without Section 179, you’d spread that deduction over five or seven years, taking only a fraction in year one. With Section 179, you deduct the full $200,000 immediately—reducing taxable income and freeing up cash for payroll, inventory, or marketing. That immediate benefit can be a game‑changer for cash flow.

Common Pitfalls to Avoid

Mixing personal and business use. You must substantiate that each item is used more than 50% for business. Keep logs or mileage records for vehicles.
Overlooking income limits. If your net business income is $150,000, you can’t deduct $200,000 under Section 179—though bonus depreciation can fill remaining gaps.
Missing the deadline. Equipment must be “placed in service” by year‑end—you can’t rely on purchase date alone.
Failing to file timely elections. Elections are made on your tax return; if you miss them, you lose the benefit until next year.

Beyond Section 179: Long‑Term Strategy

Section 179 is a powerful tool, but it’s one piece of a comprehensive tax plan. Combining it with bonus depreciation, retirement plan contributions, and other credits—like energy-efficiency incentives—can further reduce your liability. As trusted business advisors, we help clients weave these strategies together, ensuring they invest in growth without sacrificing tax efficiency.

Upgrading your equipment shouldn’t become a tax headache—it should be an opportunity. If you’re weighing a major purchase or reviewing year‑end planning, let’s connect. Our Columbus Hogan CPA team can map out a depreciation strategy that accelerates deductions, optimizes cash flow, and keeps you focused on running your business. Contact us today to start maximizing your Section 179 benefit.