Did Your Business Invest in Equipment in 2025? Don’t Forget About the Section 179 Tax Deduction
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As we approach the end of the year, we want to remind business owners to utilize Section 179 of the IRS Tax Code. Section 179 can be extremely profitable for your business, allowing you to invest in equipment while retaining more of your tax dollars. According to the IRS under the 2018 tax reform, and subject to limitations, businesses are able to deduct the full purchase price for qualifying equipment – yes, that could include the Panhandle Power Wash Supply you purchased in 2025! Prior to the reform, the most businesses were allowed to deduct was a small portion of each qualifying equipment’s value based on depreciation, literally taking it years to complete. Now, Section 179 allows businesses to deduct the full purchase price in the year the qualifying equipment was put to use for your business. According to Section179.org, this includes qualifying equipment that was purchased in-full, as well as financed. If you purchased a piece of equipment in 2025, be sure to check with your CPA or tax preparer about deducting that full amount, as well as eligibility for a bonus depreciation.
Buy Early. If you want to take advantage of the Section 179 benefits, it’s important to note that in order for equipment purchased in 2025 to qualify, it must be put to use in 2025 for your business as well. We know it’s common practice to purchase equipment in the fourth quarter of the year, but don’t delay because equipment that is simply newly purchased but sitting on your lot may not qualify until the year it is put into service.
- Maximum Deduction: Businesses can deduct up to $1,250,000 for qualifying equipment purchases. However, there is a legislative proposal to increase this to $2,500,000 for 2025.
- Phase-Out Threshold: The deduction starts to phase out dollar-for-dollar when total equipment purchases exceed $3,130,000. A legislative proposal also seeks to raise this threshold to $4,000,000 for 2025.
- Eligible Equipment: Both new and used equipment qualify, provided it's new to the business. This includes machinery, office furniture, computers, off-the-shelf software, and certain vehicles.
- Vehicles: There are special rules for vehicles, particularly for SUVs with a gross vehicle weight rating (GVWR) between 6,000 and 14,000 pounds, which are capped at a $31,300 Section 179 deduction for 2025.
- Bonus Depreciation: Businesses can also utilize bonus depreciation in conjunction with Section 179. For 2025, the bonus depreciation rate is 40%. This can be applied to the remaining cost after the Section 179 deduction.
- Important Note: To qualify for the Section 179 deduction, the equipment must be purchased, installed, and placed in service by December 31, 2025, and used more than 50% for business purposes.
The deduction can include both new and used equipment acquired and put into service between 1/1/2025 and 12/31/2025. In addition to these limits, businesses can also take advantage of a 60% bonus depreciation on both new and used equipment for the entirety of 2025.
Bring Purchase and Setup Records to your Tax Appointment. If you purchased equipment in 2025, you will need records on the date of purchase, the date you started using the equipment, and all costs associated with the purchase, like shipping and setup. If you lost any of this documentation, check with us at Panhandle Power Wash Supply to get a copy. Your tax preparer can take the Section 179 deduction on certain qualifying business property by electing it, which is done by filling out the required form and including with your business tax return. Please consult with your certified tax professional for eligibility and limitations that apply to you.
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