Running a business often means investing in equipment, technology, and other big-ticket items to keep things moving. The good news? The IRS gives businesses a way to save money on taxes for these purchases. It’s called Section 179, and it can be a powerful tool when you know how to use it.
What Is Section 179?
Normally, when you buy something large for your business, like a new copier, server, or vehicle, you can’t deduct the full cost right away. Instead, you spread the deduction over several years through depreciation.
Section 179 changes that. It allows you to deduct the full cost of qualifying equipment purchases in the year you buy and start using them. That means you save more on taxes now, keeping cash in your business for other needs.
The 2025 Limits
The rules have changed recently, and in 2025, businesses can deduct more than ever. Here’s how it works:
- You can deduct up to $2.5 million in qualifying property.
- If your total purchases exceed $4 million, your available deduction begins to phase out.
- Once you hit $6.5 million in purchases, Section 179 no longer applies.
For most small and mid-sized businesses, Section 179 remains an excellent way to lower tax liability and improve cash flow.
What Qualifies?
Not every purchase counts, but here are some of the most common qualifying items:
- Office equipment – printers, copiers, servers, desks, and chairs
- Technology – computers, networking gear, and off-the-shelf software
- Building improvements – roofs, HVAC systems, alarms, and sprinklers
- Vehicles – trucks, vans, and certain SUVs used primarily for business
How Do You Claim It?
Using Section 179 isn’t complicated, but you do need to follow a few steps:
- Buy and start using the equipment before December 31, 2025.
- Confirm it qualifies (business use must exceed 50%).
- Make the election on IRS Form 4562 when filing your taxes.
- Keep good records, receipts, invoices, and proof of business use.
Section 179 vs. Bonus Depreciation
You may also hear about “bonus depreciation.” Here’s how it differs:
- Section 179: You choose which purchases to expense now (up to the annual limit).
- Bonus depreciation: Applies automatically after Section 179 and can often cover the remaining cost, sometimes up to 100%.
Together, these two deductions can help maximize your tax savings.
A Quick Example
Let’s say your business purchases $100,000 of office equipment in 2025:
- With Section 179, you can deduct the full $100,000 this year.
- If your business income is $90,000, you can deduct $90,000 now and carry over the remaining $10,000 to next year.
The biggest benefit? Improved cash flow. By lowering your taxes this year, you keep more money in your business, money you can use to reinvest, hire, or save.
Key Things to Remember
- Section 179 applies to purchases you start using in the same year.
- The 2025 deduction limit is $2.5 million, with a phase-out beginning at $4 million.
- You must use the item more than 50% for business purposes.
- Always check with your tax advisor, rules can change, and some states have their own limits.
How Applied Innovation Can Help
At Applied Innovation, we don’t just help you find the right technology, we help you get the most out of your investment. Whether it’s upgrading your office infrastructure, automating workflows, or improving data security, our team can help you make strategic purchases that qualify for Section 179 and deliver long-term value.
If you’re planning technology or equipment upgrades in 2025, this tax break could make a big difference. Let’s make the most of your investment, together. Explore how we make it simple.
Disclaimer: This article is for informational purposes only and should not be taken as tax or legal advice. Every business situation is unique. Please consult your accountant or tax advisor to determine how Section 179 applies to your specific circumstances.