Guide

Section 179 explained: vehicles and equipment

Section 179 of the tax code lets a business deduct the cost of qualifying equipment and vehicles in the year it starts using them, instead of spreading the deduction over several years. Here is what the rules say, in plain words, with sources. This is general information, not tax advice.

The simple version

When a business buys something that lasts, like a label printer, a computer or a van, the tax code usually does not let it deduct the whole cost at once. It spreads the deduction over several years. This is called depreciation.

Section 179 is an election that lets a business deduct the cost of qualifying property in the year it is first used in the business, up to a yearly limit. It is claimed on IRS Form 4562. Whether to use it, and how it fits with the rest of a return, is a question for a CPA. Flipfiled does not give tax advice.

Who can use it?

• Businesses of most structures. Sole proprietors (on Schedule C), partnerships, multi-member LLCs and S corporations all use Form 4562. The IRS says estates and trusts cannot elect Section 179.
• You must actively run the business. The IRS Form 4562 instructions say a mere passive investor is not considered to actively conduct a trade or business.
• Partnerships and S corporations apply the limits at the entity level and again for each owner or shareholder.
• Employees who work for someone else do not use Section 179 for their own job expenses. The IRS directs employees to a different form for job-related vehicle expenses.
• Having an LLC is not required. An LLC does not by itself change who can use Section 179. See S corp vs LLC for how structures are taxed.

What the law itself says

Section 179 is part of the Internal Revenue Code (title 26 of the U.S. Code). In plain terms, the statute and its Treasury regulation say:

• The election: a taxpayer may elect to treat the cost of “section 179 property” as an expense, deductible in the year the property is placed in service (26 U.S.C. 179(a)).
• What counts as section 179 property: tangible property to which the depreciation rules apply, or certain software, acquired by purchase for use in an active business (26 U.S.C. 179(d)(1)).
• A yearly dollar limit that is reduced when total purchases in the year go above a second threshold (179(b)(1) and (b)(2)).
• A taxable income limit: the deduction generally cannot exceed the taxpayer’s taxable income from the active conduct of a business (179(b)(3)).
• A separate cap for sport utility vehicles rated at not more than 14,000 pounds gross vehicle weight (179(b)(5)).
• Yearly inflation adjustments: the dollar amounts are adjusted for inflation each year (179(b)(6)), which is why the figures on this page carry a year. The IRS publishes the current numbers.
• Who may elect: the Treasury regulation says the election is not available to trusts, estates and certain noncorporate lessors, and that for a partnership or S corporation the entity makes the election, not its owners (26 CFR 1.179-1).

Congress has amended the dollar amounts in recent years, so older copies of the statute show smaller numbers. For the current figures, use IRS Publication 946, linked below.

The limits

• Yearly dollar limit. For 2026, the maximum Section 179 deduction is $2,560,000. It is reduced dollar for dollar once the qualifying property placed in service in the year exceeds $4,090,000. (For 2025 the figures were $2,500,000 and $4,000,000.)
• Business income limit. The deduction cannot be more than your taxable income from the active conduct of the business, figured before the deduction. A disallowed amount can be carried forward to the next year.
• More than 50% business use. You can claim it only if the property is used more than 50% for business in the year it is placed in service. The amount you can deduct is the cost times the business-use percentage. The IRS gives the example of an $11,000 item used 80% for business, which gives $8,800.
• Bought, not given. The property has to be acquired by purchase. It does not qualify if it came by gift or inheritance or from a related person.

Vehicles and the weight rules

Vehicles are where the weight rules matter. The IRS sorts them by gross vehicle weight rating (GVWR), the maximum loaded weight set by the maker.

So the idea that a business can deduct 100% of a vehicle in the first year has conditions. It depends on the vehicle’s weight and design, on business use above 50%, on the business income limit, and on the yearly caps. A vehicle used 80% for business can be deducted only for that 80%.

Other things to know about vehicles

• Bonus depreciation is separate. The IRS says a 100% special depreciation allowance applies to qualifying property acquired and placed in service after January 19, 2025. It is a different rule from Section 179, with its own conditions. A taxpayer can elect a 40% allowance instead in some cases.
• Business use is measured by miles. The Form 4562 instructions say business use is business miles divided by total miles, and commuting is not counted as business use.
• Listed property. Passenger automobiles and similar property that lends itself to personal use go in Part V of Form 4562, which is required when you claim depreciation or vehicle expenses.
• The standard mileage rate is an alternative. For 2026, the IRS business rate is 72.5 cents per mile. Using it is optional. For an owned vehicle you must choose the standard rate in the first year the vehicle is available for business use. Which method is better for a given vehicle is a CPA question.

What equipment qualifies?

Under the IRS rules, qualifying property includes:

• Tangible personal property such as machinery, equipment and office equipment.
• Off-the-shelf computer software that is generally available to the public.
• Qualified real property improvements, such as certain roofs, HVAC, fire protection and alarm systems and security systems on nonresidential buildings.

For a reseller, examples of equipment that may fit these categories include a label printer, a computer, a scale, a camera or lighting for photos, and shelving. Whether a particular item qualifies, and how it is classified, is a question for a CPA. Supplies that get used up, like tape, boxes and printer paper, are usually handled as ordinary expenses. See supplies and equipment.

What does not qualify

• Land and land improvements, such as paved parking areas, docks and fences.
• Property acquired by gift or inheritance, or from a related person.
• Property held only to produce investment or rental income when renting is not your business.
• Property used mostly outside the United States.
• Property used 50% or less for business.

Illinois

Illinois income tax starts from your federal numbers. The Illinois Department of Revenue requires filers who claimed federal bonus depreciation to file Form IL-4562, which adds back the federal special depreciation and allows a subtraction for the regular depreciation, so that total depreciation over the life of the asset matches. The IL-4562 instructions do not describe a separate Illinois dollar limit on Section 179. Check the current IL-4562 instructions, or ask a CPA, for how it applies to your return. Sales tax on the purchase of equipment is a separate matter from income tax. See sales tax registration and the CRT-61, which covers items you buy to resell, not equipment you use.

Record keeping

• Keep the receipt or bill of sale and the date the item was first used in the business.
• For a vehicle, keep a mileage log showing business and total miles, and write down the GVWR from the label in the driver’s door jamb or the manufacturer’s documents.
• Keep business and personal spending separate. See opening a business bank account.

Questions to ask a CPA

• Does Section 179, bonus depreciation, or the standard mileage rate make sense for my vehicle?
• How does my business income limit the deduction this year?
• How is my business-use percentage documented?
• How does this show up on my Illinois return?

I am not a CPA or an attorney

This page is general educational information drawn from the federal and Illinois government sources below. It is not legal, tax or accounting advice, and it is not a recommendation. Flipfiled does not prepare tax returns or give tax advice. Limits change every year, so confirm current figures with the IRS or a professional.

Sources: Internal Revenue Code, 26 U.S.C. 179 (govinfo.gov); Internal Revenue Code, 26 U.S.C. 179 (U.S. House Office of the Law Revision Counsel); Treasury Regulation, 26 CFR 1.179-1 (eCFR); IRS, Publication 946, How to Depreciate Property (2026 and 2025 limits; qualifying property; vehicles); IRS, Instructions for Form 4562; IRS, 2024 Instructions for Form 4562 (business income limit; listed property); IRS, Publication 463 (passenger automobile limits); IRS, 2026 business standard mileage rate; Illinois Department of Revenue, IL-4562 instructions. Checked Oct 28, 2026.