Section 179 of the IRS tax code lets a business deduct the full purchase price of qualifying equipment in the year it is placed in service, instead of depreciating it a little at a time over five, seven, or more years. For equipment buyers, that means a large, immediate reduction in taxable income — and here is the part most lenders skip: you can finance the equipment and still deduct it. Commercial Funding Partners structures equipment financing from $250,000 to $100M+ per project, and the Section 179 advantage gets more dramatic, not less, as the deal size grows. The deduction is capped each year at a limit the IRS indexes annually — confirm the current-year Section 179 limit and the spending phase-out threshold with your CPA before you file. The calculator below estimates the numbers for your own deal.
Section 179 calculator
Enter your equipment cost, tax rate, and first-year bonus depreciation percentage. The estimate updates as you type. This is a planning tool, not tax advice.
Total cost of qualifying equipment placed in service this year. Example shown: $1,200,000.
The IRS indexes this annually. Leave blank to deduct up to the full equipment cost under Section 179; enter the current-year figure (confirm with your CPA) to apply the cap.
Default 21% (federal C-corp rate). Pass-through entities should use the owner’s marginal rate — ask your CPA.
Applies to the cost remaining after the Section 179 deduction. The bonus percentage is set by current law and has changed year to year — confirm this year’s rate with your CPA.
Show the math
Estimate only — not tax advice. Section 179 limits, the spending phase-out, bonus-depreciation percentages, qualifying-property rules, and state conformity change from year to year and by entity. Deductions cannot exceed taxable business income (Section 179 specifically). Confirm every figure with your CPA or tax advisor before relying on it.
How Section 179 works
Normally, when a company buys equipment, the IRS treats it as a capital asset and makes you deduct the cost gradually through depreciation — spreading the write-off across the asset's useful life. Section 179 changes that. It lets you elect to deduct the full purchase price (up to the annual limit) in year one, the same year the equipment is placed in service. The mechanics are straightforward:
- The equipment has to qualify. Most tangible business equipment does — machinery, manufacturing and production lines, medical and imaging systems, work trucks and trailers, material-handling and warehouse equipment, and most off-the-shelf business software. It must be used more than 50% for business and placed in service during the tax year.
- There is an annual deduction cap. The IRS indexes the Section 179 limit for inflation each year. Spend above a separate, higher phase-out threshold and the available deduction begins to reduce dollar-for-dollar. Confirm the current-year limit and threshold with your CPA.
- It cannot exceed your taxable income. Section 179 can reduce your business income to zero, but not below it. An unused amount can generally carry forward — another reason to plan the election with your accountant.
Section 179 vs. bonus depreciation
These two write-offs work together, and the calculator above stacks them in the order the IRS applies them: Section 179 first, bonus depreciation on whatever is left.
- Section 179 is an election you make line by line. You choose how much to deduct, up to the annual cap, and it is limited by your taxable income. That control is useful when you want to deduct exactly enough — for example, to zero out income without wasting deductions.
- Bonus depreciation applies to the cost remaining after Section 179. It has no annual dollar cap and is not limited by taxable income (so it can create or increase a loss), but the percentage is fixed by law and has changed from year to year. Confirm this year's bonus percentage with your CPA — the calculator defaults to 100% only as a starting point.
For a mid-ticket purchase well above the Section 179 limit — a $1,200,000 production line, a $2,500,000 imaging suite — Section 179 covers the first slice up to the cap, and bonus depreciation does the heavy lifting on the much larger remainder. That is why the first-year deduction on a large deal can approach the full purchase price.
How financing interacts with Section 179
This is the angle that matters most for a CFP borrower, and it surprises a lot of buyers: you do not have to pay cash to take the deduction. The IRS bases Section 179 on the equipment being placed in service, not on how you paid for it. Finance the equipment — through an equipment loan or a non-tax (capital) lease where you are treated as the owner for tax purposes — and you can deduct the full qualifying amount this year while paying for the equipment over time.
Run the numbers and the result can be striking: in a year where the first-year deduction is large, the estimated tax savings can exceed your first year of payments. You free up the cash flow advantage of financing and capture the deduction in the same year. The structure matters, though — a true tax lease (operating lease) is treated differently, because the lessor keeps the depreciation. Your equipment financing structure and your tax strategy have to be decided together. If the equipment you would deduct is equipment you already own, a sale-leaseback can unlock capital from it — confirm the tax treatment of any leaseback with your CPA, since it depends on the structure.
Year-end timing
Section 179 turns on a single phrase: placed in service. The equipment has to be installed and ready for its intended use by the last day of your tax year — not merely ordered, not merely paid for. For equipment with a long build or delivery cycle, that deadline drives the financing calendar. If a year-end deduction is the goal, the conversation about financing, delivery, and installation has to start early enough that the equipment is actually running before the year closes. This is exactly where progress-payment and milestone structures matter, and it is a recurring theme across our funded transactions. Work through what your deal needs with our equipment financing readiness checklist before you call.
Who qualifies
Section 179 is available to businesses that buy, finance, or lease (under a qualifying structure) eligible equipment and put it to work during the tax year. The practical requirements:
- The equipment is tangible, depreciable business property used more than 50% for business.
- It is placed in service during the tax year you take the deduction.
- Your total qualifying purchases stay within the phase-out threshold (above it, the available Section 179 deduction shrinks).
- You have enough taxable business income to absorb the Section 179 portion (bonus depreciation is not income-limited).
Eligibility, limits, and the treatment of specific assets — especially vehicles and used equipment — carry rules that change. CFP structures the financing; your CPA confirms the deduction.
Section 179 FAQs
What is the Section 179 deduction limit this year?
The IRS indexes the Section 179 deduction limit for inflation every year, along with a separate, higher spending phase-out threshold above which the deduction begins to reduce. Because the figure changes annually, confirm the current-year Section 179 limit and threshold with your CPA or the IRS before you file — do not rely on last year's number.
Can I take Section 179 on financed equipment?
Yes. The Section 179 deduction is based on the equipment being placed in service, not on how it was paid for. You can finance equipment with a loan or a non-tax (capital) lease and still deduct the full qualifying amount in year one while paying over time — which is why financing plus Section 179 is a powerful combination. A true tax lease (operating lease) is treated differently, because the lessor retains the depreciation, so the financing structure and the tax election should be decided together.
What is the difference between Section 179 and bonus depreciation?
Section 179 is an election you make up to an annual dollar cap, and it cannot exceed your taxable business income. Bonus depreciation applies to the equipment cost remaining after Section 179, has no annual dollar cap, is not limited by taxable income, and uses a percentage fixed by law that has changed from year to year. In practice they stack: Section 179 first, bonus depreciation on the remainder.
Does the equipment have to be new?
Not necessarily. Section 179 can apply to both new and used equipment, as long as the equipment is new to your business, used more than 50% for business, and placed in service during the tax year. Specific rules differ for certain asset types, so confirm with your CPA.
When does the equipment have to be in service to deduct it this year?
By the last day of your tax year. "Placed in service" means installed and ready for its intended use — not just ordered or paid for. For equipment with a long delivery or build cycle, that deadline is the reason to start the financing and installation timeline early if a year-end deduction matters.
Is this calculator tax advice?
No. It is a planning estimate. Section 179 limits, phase-outs, bonus-depreciation percentages, qualifying-property rules, and state conformity change year to year and by entity, and deductions are subject to income and other limits. Use the estimate to frame the conversation, then confirm every figure with your CPA before relying on it.
Talk through your deal with CFP
Commercial Funding Partners is a direct equipment lender headquartered in Draper, Utah, structuring financing from $250,000 to $100M+ per project. We will help you structure the financing so it fits both your project timeline and your tax strategy — your CPA confirms the deduction, we build the capital path. Call (801) 545-4000 or request a quote and a member of the Draper team will respond directly.