The Section 179 deduction for 2026

Section 179 in one minute

Section 179 limits for 2026 (and 2025)

The July 2025 tax law, Public Law 119-21, doubled the limit to $2,500,000 for tax years beginning in 2025 and indexed it for inflation from 2026. The IRS published the 2026 figures in Revenue Procedure 2025-32 and the 2026 car limits in Revenue Procedure 2026-15.

* For property acquired after January 19, 2025. Property acquired before January 20, 2025 under the old rules gets 40% if placed in service in 2025 and 20% in 2026.

How the phase-out works

The limit is for businesses that buy a lot, but not too much. Every dollar of Section 179 property you place in service above $4,090,000 takes a dollar off the limit, so a business that places $6,650,000 or more in service in 2026 gets no Section 179 at all, and relies on bonus depreciation instead.

The limit has grown 25-fold since 2003

Congress has raised the cap again and again, often first as a temporary measure: $100,000 in 2003, $500,000 from 2010, $1,000,000 from 2018 and $2,500,000 from 2025.

How Section 179 works, step by step

1. 1

   Buy it

   Acquire the property by purchase, from someone who is not a related person. A gift or an inheritance does not qualify; a loan does not change anything.

2. 2

   Put it to work by December 31

   The deduction belongs to the year the property is placed in service: ready and available for its use. Paying in December for a January delivery makes it 2027 property.

3. 3

   Use it more than 50% for business

   Below that line, Section 179 is off the table. Your deduction is the cost times your business-use percentage.

4. 4

   Elect it on Form 4562

   Part I of Form 4562, filed with your return, asset by asset. You choose how much of each cost to expense.

5. 5

   Check it against business income

   The deduction cannot exceed your taxable income from active business, wages included. Any excess carries forward to next year.

The deduction then flows to where the business reports income: Schedule C for a sole proprietor or single-member LLC, or the entity’s return for a partnership or S corporation, which passes it to the owners on their Schedule K-1. For partnerships and S corporations the limits apply twice, once to the business and again to each owner.

Vehicles: the 6,000-lb rule

For a vehicle, the number that decides the deduction is not the price but the gross vehicle weight rating (GVWR): the most the vehicle is rated to weigh fully loaded, set by the manufacturer and printed on the label in the driver’s door jamb. It is not the curb weight, which is always lower.

One nuance in the wording: the tax code applies gross vehicle weight to trucks and vans, and “unloaded” gross vehicle weight to other vehicles. SUVs, pickups and minivans are generally treated as trucks for this purpose, which is why GVWR is the figure used, and the SUV rule itself is written in gross vehicle weight. For a crossover that clears 6,000 lbs by a handful of pounds, settle the classification with your preparer before you buy.

Worked example: an $85,000 SUV

A consultant buys an SUV rated at 7,000 lbs GVWR for $85,000, puts it into service in March 2026 and uses it 100% for business. Section 179 covers $32,000; 100% bonus depreciation covers the other $53,000. The 2026 deduction is the full $85,000. At 80% business use the same purchase gives $68,000, and the log has to show the 80%. The same buyer choosing a 5,500-lb crossover at the same price would be held to $20,300 in year one.

Vehicles over 6,000 lbs: the 2026 list

Gross vehicle weight ratings for 2026 models, checked October 25, 2026. Where the manufacturer publishes the rating we took it from its spec sheet, press kit or fleet guide (“Maker”). Several brands, GM, Ford and most European makers among them, print only curb weight, so for those the figure is from an independent spec listing (“Listing”); for Tesla and Rivian it is the federal weight class decoded from the VIN. A range means the rating varies by trim, drivetrain or battery. Use the list to shortlist; the label on the vehicle you buy is what counts.

Section 179 calculator

Estimate the first-year write-off for one purchase under the 2026 rules: Section 179 first, up to your business income and any vehicle cap, then 100% bonus depreciation on the rest.

What qualifies, and what does not

Lodging is no longer excluded: since 2018, furniture and equipment used in hotels and other lodging qualify. Estates and trusts cannot claim Section 179 at all. Buying with a loan does not reduce the deduction; it is based on the cost, not on what you have paid so far.

Section 179 vs bonus depreciation

Bonus depreciation, the “special depreciation allowance” of Section 168(k), is 100% permanently for property acquired after January 19, 2025 under Public Law 119-21. Property is treated as acquired on the date a written binding contract was signed, so a 2024 contract for a machine delivered in 2026 is old-law property at 20%.

The same law added a separate 100% allowance for qualified production property (Section 168(n)): the part of a new factory or other nonresidential building used for manufacturing, production or refining, with construction starting after January 19, 2025 and before 2029 and the building in service before 2031. Offices, parking, sales and research space are excluded. It is a different deduction from Section 179 and needs its own election.

The business income limit and carryover

Section 179 cannot be larger than your taxable income from the active conduct of a trade or business, figured before the Section 179 deduction itself. The IRS counts all of your active businesses together, plus wages, salary and tips from a job. A business you only invest in, without meaningful participation, does not count.

Anything over the limit is not lost: it becomes a Section 179 carryover to next year, reported on line 13 of Form 4562, and is deducted when there is income to absorb it. Married couples filing separately are treated as one taxpayer and split the limit 50/50 unless they choose another split.

Recapture: when the deduction comes back

If business use of the property drops to 50% or less in any year of its recovery period, you recapture part of the deduction: the difference between the Section 179 you took and the depreciation you would have been allowed is added to ordinary income that year, on Part IV of Form 4797. Vehicles are where this happens most, when a work SUV becomes the family car.

Selling the property is a separate event. A sale for more than its depreciated value produces a gain, and the part of that gain that reflects the deduction is taxed as ordinary income.

Section 179 on an Illinois return

Illinois starts from federal income, and Form IL-4562 reverses only the bonus depreciation: it is added back in the year you take it and subtracted over the following years as ordinary depreciation would have allowed. The form has no line for Section 179, so the federal Section 179 deduction carries through to Illinois. From tax year 2026, Public Act 104-0453 extends the add-back to the new 100% allowance for qualified production property as well.

The practical result for an Illinois business: a purchase written off with Section 179 is also deducted on the Illinois return in the same year, while the same purchase written off with bonus depreciation is deducted federally now and in Illinois over several years. When income allows, it can pay to elect Section 179 on the first dollars rather than let bonus depreciation take them.

Section 179 by the numbers

The Joint Committee scores are for the bill as passed by the Senate, measured against a current-policy baseline; the enacted law is the same in these provisions.

Five mistakes behind most lost deductions

1. 01

   Paid in December, delivered in January

   Ordering is not placing in service. If the equipment is not ready and available for its use by December 31, it is next year’s deduction.

2. 02

   Trusting the brochure instead of the sticker

   The 6,000-lb test is the gross vehicle weight rating, printed on the label in the driver’s door jamb. Two trims of the same model can land on opposite sides of it.

3. 03

   No mileage log

   A vehicle deduction rests on business use above 50%, and business use rests on a log kept as you drive. Without one, the deduction is the easiest one on the return to disallow.

4. 04

   Letting business use slip later

   If a vehicle’s business use falls to 50% or less in a later year of its recovery period, part of the deduction comes back as ordinary income.

5. 05

   Expensing more than the business earned

   Section 179 above business income does not create a loss; it sits in a carryover. When bonus depreciation would have used it this year, the election order matters.

The 2026 Section 179 quick guide

Questions people ask

Where these rules come from

• IRS Rev. Proc. 2025-32, section 4.24 (2026 Section 179 limits)
• IRS Rev. Proc. 2026-15 (2026 passenger automobile depreciation limits)
• IRS Rev. Proc. 2025-16 (2025 passenger automobile depreciation limits)
• IRS Publication 946, How To Depreciate Property
• IRS Instructions for Form 4562
• IRS Notice 2026-11 (100% bonus depreciation after January 19, 2025)
• 26 U.S.C. § 179
• 26 U.S.C. § 280F (6,000-lb passenger automobile definition)
• Illinois Department of Revenue, Form IL-4562 instructions
• Illinois Department of Revenue, Informational Bulletin FY 2026-15
• Joint Committee on Taxation, JCX-45-25, Estimates of Federal Tax Expenditures 2025-2029
• Joint Committee on Taxation, JCX-34-25, estimated budget effects of P.L. 119-21 (Senate-passed)
• IRS Statistics of Income, Partnership Returns, Tax Year 2023
• SBA Office of Advocacy, Frequently Asked Questions About Small Business (2026)

General information for tax year 2026, current on October 25, 2026, not advice about your situation. Limits change every year; the official pages above are the authority.

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• Illinois income tax
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