Section 179 Calculator

About the Section 179 Calculator

Section 179 of the US tax code lets businesses deduct the full cost of qualifying equipment, software and some vehicles in the year they are placed in service, rather than depreciating them over several years. For a small business buying a truck, machinery or computers, that can mean a large tax saving now instead of small deductions spread across five or seven years. The deduction has limits, though: an annual dollar cap, a phase-out for businesses buying a lot of equipment, a business-use test and a limit tied to business income.

This Section 179 calculator applies those rules. Enter the cost of the property, the business use percentage, the total qualifying property placed in service this year, your business taxable income and tax rate, and the annual limit and threshold. It shows the deduction this year, any amount carried forward, and the estimated tax saving.

How to Use the Section 179 Calculator

Enter the cost and the business use percentage.

Enter the total property placed in service this year and your business taxable income.

Enter your marginal tax rate, and check the deduction limit and phase-out threshold for your tax year.

The Formulas

  eligible    = cost × business use (needs more than 50%)
  phase-out   = max(0, total placed in service − threshold)
  limit       = deduction limit − phase-out
  allowed     = min(eligible, limit)
  deduction   = min(allowed, business taxable income)
  carryover   = allowed − deduction
  tax saving  = deduction × tax rate

Step-by-Step Example

An 80,000 machine, 100% business use, 150,000 business income, 24% tax rate, 2025 limits.

  eligible    80,000 × 100% = 80,000
  limit       2,500,000 (no phase-out below 4,000,000)
  deduction   min(80,000, 2,500,000, 150,000) = 80,000
  tax saving  80,000 × 24% = 19,200

The Limits

For tax years beginning in 2025, the One Big Beautiful Bill Act raised the Section 179 limit to 2.5 million and the phase-out threshold to 4 million, both indexed for inflation in later years. Once total qualifying property placed in service in a year exceeds the threshold, the limit falls dollar for dollar, disappearing entirely for very large buyers. The calculator lets you enter the figures for your year.

Business Use

Only property used more than 50% for business qualifies, and only the business share can be deducted. A vehicle used 70% for business allows a deduction on 70% of its cost. Keep mileage logs or usage records. If business use later drops to 50% or less within the recovery period, part of the deduction is recaptured as ordinary income.

The Income Limit

The deduction cannot exceed the taxable income from your active trades or businesses for the year, including wages from a job for some taxpayers. A business with little income cannot use Section 179 to create a loss; the excess carries forward to later years. Bonus depreciation does not have this limit, which is one reason businesses sometimes combine the two.

Section 179 and Bonus Depreciation

Bonus depreciation lets businesses deduct a percentage of the cost of qualifying property in the first year. It was restored to 100% permanently for property acquired after 19 January 2025. Unlike Section 179, it has no dollar cap and can create a loss, but it applies automatically to whole classes of property unless you elect out. Many businesses use Section 179 for chosen items and bonus depreciation for the rest. A tax adviser can help choose the best combination.

Vehicles

Heavy trucks and vans used mainly for business often qualify in full. Passenger cars are subject to annual depreciation caps, and SUVs between 6,000 and 14,000 pounds gross vehicle weight have a separate, lower Section 179 limit that is indexed each year.

Placed in Service

The deduction is taken in the year property is placed in service, meaning ready and available for its intended use, not when it is ordered or paid for. Equipment bought in late December but delivered in January belongs to the next tax year. Financing does not prevent the deduction: property bought with a loan can be deducted in full while you pay it off over time.

Qualifying Property

Section 179 covers tangible personal property used in a business, such as machinery, tools, computers, office furniture and many vehicles, as well as off-the-shelf software. Certain improvements to non-residential buildings, including roofs, heating and air conditioning, fire protection and security systems, also qualify. Land and most buildings do not.

State Taxes

Not all states follow the federal Section 179 rules. Some cap the deduction at much lower amounts or require regular depreciation, so the state tax saving may differ from the federal one. Check your state's rules or ask your tax preparer before relying on the full saving.

Record Keeping

Keep invoices, proof of the in-service date and records of business use for as long as the property is depreciated.

Understanding Your Result

The headline gives the deduction this year.

The eligible line shows the business share of the cost.

The limits line shows the cap, phase-out and any carryover.

The tax saving line estimates the tax reduction.

When Should You Use This Calculator?

Use it before buying equipment near the end of the tax year.

Use it to compare buying with leasing.

Use it to estimate the cash-flow benefit of an equipment purchase.

Common Mistakes

Forgetting the business use test. Below 50% does not qualify.

Ignoring the income limit. Excess carries forward.

Using last year's limits. They are indexed annually.

Buying just for the deduction. A deduction saves only part of the cost.