If you buy or finance business equipment, you’ll want to be familiar with Section 179 of the U.S. Internal Revenue Code because it may provide significant tax benefits on qualifying equipment purchases. When paired with equipment financing, Section 179 may help businesses acquire needed equipment while preserving working capital and maintaining cash flow.
Historically, businesses generally recovered the cost of equipment purchases through depreciation over several years. Today, Section 179 allows many businesses to deduct the cost of qualifying equipment in the year it is placed into service, subject to applicable limits and eligibility requirements.
By accelerating potential tax benefits, Section 179 may help businesses move forward with equipment acquisitions that support growth, productivity, and operational efficiency.
What is Section 179?
Section 179 allows qualifying businesses to deduct the cost of eligible equipment in the year the equipment is placed into service, subject to applicable limits and requirements. Eligible equipment may include construction equipment, industrial machinery, manufacturing equipment, medical equipment, vehicles, computers, office equipment and certain software used for business purposes. Certain vehicles are subject to additional dollar limits (for example, a specific cap applies to many heavy SUVs).
Because Section 179 applies to qualifying financed equipment as well as equipment purchased outright, many businesses evaluate financing to acquire needed equipment while preserving working capital.
At First Business Bank, our Equipment Finance team works with businesses across a variety of industries to provide financing solutions for equipment acquisitions. We regularly collaborate with business owners, CPAs, equipment distributors and manufacturers to support equipment purchases, preserve cash flow, and help organizations achieve their growth objectives. We also partner with equipment manufacturers and distributors through vendor finance programs that provide financing solutions for their customers. Businesses should consult their tax advisor regarding Section 179 eligibility and potential tax benefits.
Understanding the Potential Benefits of Section 179
Section 179 deduction limits and bonus depreciation percentages may change periodically. For tax year 2026, qualifying businesses may be able to deduct up to $2,560,000 of eligible equipment costs under Section 179, with the deduction beginning to phase out once total qualifying purchases exceed $4,090,000. In addition, current law provides 100% bonus depreciation for many types of qualifying property acquired and placed in service after January 19, 2025, subject to eligibility rules and elections.
Section 179 deductions are also subject to taxable income limitations and other eligibility requirements. Section 179 deductions cannot exceed your taxable income from active trades or businesses for the year; any excess generally carries forward to future years. Businesses should consult their tax advisor regarding their specific situation.
For example, a business that acquires and places qualifying equipment into service during the tax year may be able to deduct a substantial portion of the equipment's cost through Section 179 and other available depreciation provisions. The illustration shown reflects one example scenario. Businesses should consult their tax advisor regarding eligibility, deduction limits and potential tax benefits.
Managing Cash Flow During Equipment Acquisitions
When evaluating equipment purchases, businesses often consider both the potential tax benefits and the impact on cash flow. Equipment financing may help businesses acquire needed equipment while preserving working capital for payroll, inventory, expansion initiatives and other operational priorities.
Because Section 179 may allow qualifying businesses to realize tax benefits in the year equipment is placed into service, some organizations evaluate financing to acquire equipment while preserving cash flow. This combination may allow businesses to invest in needed equipment without making a large upfront cash outlay.
By combining thoughtful tax planning with an equipment financing strategy, businesses may be able to invest in productivity, efficiency, and growth while maintaining financial flexibility. Because every business situation is unique, companies should work closely with their tax advisor and financing partner when evaluating equipment acquisition decisions.
Whether you're purchasing equipment directly or exploring financing options through a manufacturer or distributor, First Business Bank's Equipment Finance team can help you evaluate solutions that support your business goals.
Last Reviewed 7/30/2026
