Section 179 deduction calculator

Section 179 goes first

The election under section 179 comes off the cost before anything else. For taxable years beginning in 2026, Rev. Proc. 2025-32, section 4.24, published in Internal Revenue Bulletin 2025-45, states that “the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $2,560,000”. You can elect less. Form 4562 asks for an amount per property, which is why this page gives you a box for it.

The bonus allowance takes what section 179 left

Whatever basis survives the section 179 election is the basis the additional first year depreciation allowance runs on. The Treasury and the IRS announced in IR-2026-06, on January 14, 2026, that Notice 2026-11 provides guidance on “a permanent 100-percent additional first year depreciation deduction for qualified property acquired, or specified plants that are planted or grafted, after Jan. 19, 2025”. So the rate this page uses is 100 percent. It applies to qualified property, and the definition of qualified property is in Publication 946. Property bought from a related party, and property a taxpayer has elected out for, is not in it. That is what the yes or no box is for.

Regular depreciation gets the remainder

Anything still left is depreciated over the recovery period for its asset class. With a 100 percent bonus allowance there is usually nothing left, which is why the third table is empty for most readers. It is not empty for someone who elected out, or whose property is not eligible. The rates here are Table A-1 of Publication 946, the general depreciation system rates under the half year convention, quoted rather than recomputed, and the recovery period for your particular asset comes from the tables in Publication 946, not from this page.

Why the order matters

Each layer reduces the basis the next one works on, so the same cost is never deducted twice. Section 179 is also the only one of the three that is capped by taxable income and the only one that can carry forward, which means moving a dollar from section 179 to the bonus allowance changes when you get it, not whether. A reader whose taxable income is small enough to clip the section 179 election, and whose property is bonus eligible, may be better served by the bonus allowance for the same dollars, because it is not subject to that limit. Whether that is true for you is a question for your accountant, not for a page that cannot see your return.

The rows below are fixed. They do not change when you use the calculator above. They exist to show what the third layer looks like when it is not empty. This illustration takes the same $120,000 machine, elects only $70,000 of it under section 179, and elects out of the bonus allowance, over a 5 year recovery period.

The 5 year rates used here are 20.00%, 32.00%, 19.20% and so on, and they sum to the whole basis across 6 tax years. The point of showing it is that the basis section 179 does not take is deferred, not lost. The deduction still arrives. It arrives in years two, three, four and later, when your loan payments have not changed at all.

The phase out is dollar for dollar, not a percentage

Under Rev. Proc. 2025-32, section 4.24, the $2,560,000 limit for taxable years beginning in 2026 “is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2026 taxable year exceeds $4,090,000”. The reduction is one dollar of limit for every dollar of property above the threshold, so the limit reaches zero at $6,650,000 of property placed in service. It counts everything you placed in service in the year, not just the asset you are pricing, which is why the calculator asks for the year's total separately. A single machine rarely triggers it. A year in which a business replaced a fleet does.

The taxable income limit defers the deduction, it does not destroy it

Publication 946 states that “your section 179 deduction cannot be more than your taxable income for the tax year that is derived from the active conduct of any trade or business”, and that “any section 179 deduction that you cannot deduct because of the taxable income limit is carried over to the next tax year”. That limit is the one that surprises a buyer who bought late in a thin year. You elect the full amount, you deduct what your income allows, and the rest waits. The calculator shows the carried amount as its own line, and it deliberately does not spend that carryforward in year two, because whether you can use it then depends on a taxable income figure that does not exist yet.

Placed in service is the date that counts, not the date you paid

Publication 946 states that you can only claim a section 179 deduction for property placed in service during the tax year for which you are making the election. Ordering the machine is not placing it in service. Paying the deposit is not placing it in service. The asset has to be ready and available for its assigned use in your business inside the tax year. A trailer that arrives on December 28 and sits on the lot untitled and unused is a different answer from one that hauled a load on December 29, and financing does not change that either way. Neither does the loan closing date.

Vehicles carry their own limits on top

Rev. Proc. 2025-32, section 4.24 also sets, for taxable years beginning in 2026, that “the cost of any sport utility vehicle that may be taken into account under § 179 cannot exceed $32,000”. Passenger automobiles carry separate annual depreciation caps of their own. This page does not apply either one, because whether a given vehicle meets the statutory definition of a sport utility vehicle or a passenger automobile turns on gross vehicle weight and body type, which are facts about your vehicle, not about your loan. If you are pricing a work truck, read the vehicle rules in the Form 4562 instructions before you trust the deduction this page prints. The commercial truck calculator and the commercial vehicle calculator handle the payment side of those purchases.

Equipment cost is what you paid for the one asset you are pricing. Amount you are financing is the figure on the finance agreement. If the cost is larger than what you financed, the difference is treated as cash at purchase and shown on its own line, and it is added to the first year outlay because that money left your account too. If you financed more than the cost, because fees were rolled in, enter the financed figure as it stands and the cash at purchase reads zero.

Taxable income is the income from the active conduct of the trade or business, figured before the section 179 deduction itself. Get that figure from your accountant or from last year's return as a starting point. It is the input most likely to be wrong, and it is the one that decides whether your deduction lands this year or next.

The two rate boxes are your own marginal rates. The page adds them and multiplies, which makes the saving an upper bound rather than a forecast, and the largest reason for that is the one worth stating plainly. A marginal rate is the rate on your last dollar of income. A deduction big enough to move you down a bracket is not all worth that rate. The top slice comes off at your marginal rate and the rest comes off lower, so the real saving is smaller than the deduction times one rate, and the gap widens the closer the deduction gets to your taxable income. On a deduction worth about half your income the arithmetic here can read high by a few percent. On one worth most of your income it can read high by nearly half. The page cannot compute the real figure, because that needs your filing status, your entity type and every other item on the return, none of which it can see. So it shows the ceiling and tells you it is the ceiling.

Two smaller effects run the same way. The page does not model the federal deduction for state taxes paid, which would make the combined rate slightly lower than plain addition, and it does not know whether your state follows the federal section 179 limits at all. Several do not. If you want the conservative reading, leave the state box empty.

The recovery period box only affects the third layer. If section 179 and the bonus allowance take the whole cost, nothing downstream depends on it. If you are financing a machine through the equipment loan calculator and comparing it against a lease, note that a true lease is not your asset to depreciate at all, which is a difference this page cannot see from the cost alone.

Can you take section 179 on equipment you financed

The deduction follows ownership and the placed in service date, not how you paid. A buyer who finances owns the asset and has the cost as basis from day one. That is the whole reason the year one arithmetic on this page can come out negative. You deduct the cost in year one and you pay for it over five years, so the tax saving arrives ahead of most of the cash going out. Whether a particular finance agreement is a purchase or a true lease for tax purposes is a question about the agreement, and this page assumes you are buying.

What the first year cash position actually means

It is the payments you make in the first twelve months, less the tax saving the first year deduction produces at the rates you entered. It is not a refund and it is not a cheque. A deduction reduces taxable income, so the saving shows up as a smaller tax bill or a smaller estimated payment, which lands on your own tax calendar rather than on the day the equipment arrives. The timing gap is real and it is worth planning for.

Why year two looks so much worse than year one

Because the deduction was a one time event and the payments were not. Year one carries the whole write off. Year two carries only whatever regular depreciation is left, which is often nothing, against a full year of payments. The table shows all three years for that reason. A decision made on the year one number alone is a decision made on one third of the arithmetic.

What happens to the part the income limit disallowed

It carries to the next tax year, per Publication 946. It is not lost. This page shows it on its own line and stops there, because using it next year depends on next year's taxable income, and inventing that figure would be the same defect as inventing a rate.

Does the deduction change if I put more money down

No. The deduction follows the cost of the asset and the date it went into service. A bigger cash payment changes the amount financed, the monthly payment and the interest, so it changes the payments column and the cash at purchase line, and it leaves the deduction column alone. Change the amount you are financing and recompute to see the two behave differently.

Is a trailer or a tractor section 179 property

Publication 946 lists tangible personal property, off the shelf computer software, qualified section 179 real property and qualified improvement property as eligible, subject to conditions in the publication, and requires the property to be used more than 50 percent in your business. Whether your particular asset qualifies is a question about the asset and its use, not about its category name, and this page does not answer it. For the payment side of those purchases there is a tractor loan calculator, a semi truck loan calculator and a farm loan calculator on this site.

Why the numbers here differ from a lender's section 179 calculator

Most of them stop at the deduction and the cash saving. They do not ask for your taxable income, so they cannot apply the limit that most often reduces a real deduction, and they do not ask what you are financing, so they cannot show the payments the saving is being set against. This page asks for both and prints the subtraction. It also prints years two and three, which is the half of the picture a page selling a finance agreement has no reason to show you.

Where the statutory numbers came from

The 2026 dollar limit, the phase out threshold and the sport utility vehicle figure are quoted from Rev. Proc. 2025-32, section 4.24 in Internal Revenue Bulletin 2025-45. The 100 percent bonus rate is from IR-2026-06 and Notice 2026-11. The taxable income limit, the carryforward, the placed in service requirement and the list of eligible property are from Publication 946. Those three amounts and the bonus percentage are the only external numbers in the calculation, they live in one file as named constants, and they are checked against these sources by the test that runs with the site's build.

Who built it

I built the calculators on this site from the ground up, including the in browser tools that print their own month by month schedule and reconcile every row back to the summary. I added this one because every section 179 calculator that ranks is run by a lender, every one of them stops at the flattering half of the arithmetic, and the half they leave out is the half a buyer signs for. I am Michael Lip.