Calculate Section 179 equipment deduction limits and tax savings with bonus depreciation and phase-out threshold analysis.
Section 179 lets a business deduct the full cost of qualifying equipment in the year it is placed in service, but the deduction is not unlimited. This calculator applies the annual dollar limit, the phase-out that shaves the limit down once total qualifying purchases pass a threshold, and bonus depreciation to arrive at a first-year deduction and tax savings. The surprise for most users is the phase-out: in a year of heavy buying, the deduction shrinks dollar-for-dollar above the threshold, and it can never exceed the business's taxable income.
A concrete input and expected output from the current implementation.
Input
2025 tax year, $3,500,000 of qualifying equipment placed in service
Expected output
Maximum Section 179 deduction: $880,000. The 2025 limit of $1,250,000 is reduced dollar-for-dollar by $370,000, the amount by which your purchases exceed the $3,130,000 phase-out threshold. Each additional dollar of purchases keeps cutting the deduction, which reaches zero at $4,380,000. Result is before the taxable business income limit.
The phase-out reduces the limit one-for-one with excess purchases: $3,500,000 minus $3,130,000 leaves $370,000 of excess, and $1,250,000 minus $370,000 leaves $880,000. The deduction hits zero when excess spending equals the full limit, at $4,380,000.
Section 179 has two annual figures, both adjusted for inflation each year: a dollar limit on what can be expensed, and a higher phase-out threshold. For every dollar of qualifying purchases above the threshold, the limit is reduced by a dollar. The calculator applies the two figures for the tax year you select, so a year with heavy total spending can produce a much smaller deduction than the headline limit suggests.
The Section 179 election applies first, up to the reduced limit, to the qualifying property you choose. Bonus depreciation then applies to the remaining basis of eligible property, and anything left falls back to regular MACRS depreciation. Because Section 179 is an election, you can take it on some assets and skip it on others, which is how the calculator compares taking the election against letting depreciation run normally.
Both. Section 179 covers new and used qualifying property, which is why it is often the only fast write-off available for second-hand machines. Bonus depreciation, by contrast, generally requires property whose first use is by you, and the property must be used more than 50% for business in both cases. Equipment acquired from a related party is excluded from Section 179.
Not this year. The Section 179 deduction is limited to taxable income from active trades or businesses, so only $40,000 is deductible now and the remaining $60,000 carries forward to future years. That limit is why the calculator asks for business income alongside the purchase price; without it, the deduction would be overstated.
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