Buying equipment before December 31 can move a big deduction into 2026, and for some owners that’s a smart move. For others it’s an expensive way to feel productive. With 100% bonus depreciation now permanent and Section 179 at $2,560,000, the rules are generous this year, so the real questions are whether you needed the equipment anyway and whether it will actually be in service by year-end. This is how to tell.
A deduction is not a discount
Here’s the math nobody puts in the sales flyer. Suppose a landscaping business is looking at a $48,000 mower and trailer package. Assume the tax on the last dollars of profit runs about 30 percent, counting federal, state, and self-employment tax (yours will differ, and your CPA can tell you what it is). A $48,000 deduction saves roughly $14,400. You spent $48,000 in cash to save $14,400, which leaves the equipment costing $33,600 after tax. That’s a fine deal if you were going to buy it anyway. It’s a poor one if you weren’t.
There’s a second wrinkle. Over the life of the equipment, you deduct its cost once either way. Bonus depreciation and Section 179 just move that deduction to the front. That’s valuable, since a tax break today beats one spread over years, but it’s a timing benefit, not free money. And if you sell the equipment later, some of what you deducted can come back as taxable income, which your CPA can explain when the time comes. Our year-end tax planning guide puts this purchase in context with the other eleven moves.
Bonus depreciation and Section 179 in 2026
The 2025 tax law made 100% bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025, so it no longer shrinks each year. Property bought under a binding contract before January 20, 2025 stays on the old phase-down, which is 20 percent for 2026, per Warren Averett’s summary. That matters if you signed for a machine in 2024 and it’s only arriving now. We cover the wider set of changes in what the 2025 tax law means for small businesses.
Section 179 is a separate election. For 2026 the maximum deduction is $2,560,000, and it begins to phase out once your qualifying purchases exceed $4,090,000, according to the IRS’s Revenue Procedure 2025-32. Section 179 is generally limited by your business’s taxable income, while bonus depreciation isn’t, and your CPA will choose the combination that fits your year.
The figures worth keeping handy:
| Item | 2026 figure |
|---|---|
| Bonus depreciation | 100%, permanent for qualifying property acquired and placed in service after January 19, 2025 |
| Section 179 maximum deduction | $2,560,000 |
| Section 179 phase-out begins | Above $4,090,000 of qualifying purchases |
| Heavy SUV Section 179 cap | $32,000 |
| Passenger vehicle first-year cap | $20,300 with bonus, $12,300 without |
Placed in service by December 31
Signing the invoice or paying for the equipment doesn’t earn the 2026 deduction. Being placed in service does: delivered, installed, and ready to do the job it was bought for. December 31, 2026 is the last day for that. Say a restaurant orders a walk-in cooler in November. It arrives December 22, but the electrician can’t wire it until January 6. The cooler wasn’t ready to use in 2026, so the deduction belongs to 2027, even though the money left the account in December.
So work backward from the calendar. Ask the vendor for a firm delivery and installation date in writing, and build in slack for the holidays. Keep the delivery receipt, the installation invoice, and a dated photo. Then record the in-service date in your fixed-asset list, because that date, not the invoice date, is what your CPA needs for the depreciation schedule. The IRS’s Publication 946 covers the details.
Vehicles: the heavy SUV rule
Vehicles have their own caps, which is why a heavy SUV and a sedan don’t behave alike. For a passenger vehicle in 2026, the first-year limit is $20,300 with bonus depreciation, or $12,300 without, then $19,800 in year two, $11,900 in year three, and $7,160 after that, according to the Journal of Accountancy’s summary of the IRS limits. Heavier vehicles, those rated over 6,000 pounds gross vehicle weight, follow a different path. Section 179 is limited to $32,000 for these SUVs, but 100% bonus can cover the rest when business use is over 50 percent.
Say a contractor buys a $70,000 SUV rated at 7,000 pounds and uses it 80 percent for business. The business share is $56,000: $32,000 through Section 179 and the remaining $24,000 through bonus. A mileage log is what proves that 80 percent, so start one on day one. Your CPA should confirm the weight rating, the use percentage, and the math before you sign.
Financing it: the deduction still works
Buying with a loan or a dealer’s financing generally doesn’t shrink the deduction. Suppose you finance the $48,000 package with $8,000 down and a five-year loan. You may still be able to deduct the full $48,000 in 2026 (subject to the limits above), while paying it off over sixty months. The interest is a separate expense, deducted as you pay it. What the deduction doesn’t do is help your cash. The loan payments start next month, and the tax savings show up later, in lower estimated payments or a smaller balance due. Before you sign, run the payments through a forecast. Our cash flow management guide shows how to do that without a finance degree.
When to say no
The best reasons to skip a year-end purchase are unglamorous. You don’t need it yet. The payments would squeeze your cash. Or your profit is small this year, in which case a large deduction saves little now and might be worth more spread across later, busier years. Your CPA can model both. Also pause if you might sell the equipment or the business soon, since some of the deduction can be recaptured, or if you’re not sure it can be delivered and running by December 31. And if you’re still wrapping up an extended 2025 return due October 15, 2026, remember that equipment placed in service last year belongs on that return, not this one. Our note on what to do if you extended your 2025 return covers that deadline.
Frequently asked questions
Do I have to use Section 179, or is bonus depreciation enough?
For most small businesses, 100% bonus depreciation alone can produce a full first-year deduction, and the two can be combined. Section 179 is generally limited by your business’s taxable income while bonus depreciation isn’t, so the right mix depends on your profit. Ask your CPA to model both before year-end.
What records should I keep for an equipment purchase?
Keep the invoice, proof of payment or the loan paperwork, the delivery and installation records that show when it was placed in service, and, for vehicles, the log that supports business use. Add the asset to your fixed-asset list the same week, while everyone still remembers the dates.
Is the 100% deduction available for everything I buy?
Only for qualifying property, and the dates matter: acquired and placed in service after January 19, 2025. Property under a binding contract signed before January 20, 2025 stays on the old phase-down, at 20 percent for 2026. Your CPA can tell you whether a specific purchase qualifies.
Where to go from here
If you’re weighing a purchase, do three things this week: get a profit estimate, confirm the delivery date in writing, and ask your CPA to price out the tax effect. A clean ledger makes all three faster. If you’d rather not build that estimate yourself, that’s the kind of work a BooXkeeping team does every month, and a free consultation is an easy way to start the conversation.
Reviewed for tax year 2026.
BooXkeeping is a bookkeeping company, not a CPA firm or a law firm. This article is general information for business owners, not tax, legal, or financial advice. Rules change and your situation is specific, so confirm anything here with your CPA or attorney before acting on it.
Buying equipment before December 31 can move a big deduction into 2026, and for some owners that’s a smart move. For others it’s an expensive way to feel productive. With 100% bonus depreciation now permanent and Section 179 at $2,560,000, the rules are generous this year, so the real questions are whether you needed the equipment anyway and whether it will actually be in service by year-end. This is how to tell.
A deduction is not a discount
Here’s the math nobody puts in the sales flyer. Suppose a landscaping business is looking at a $48,000 mower and trailer package. Assume the tax on the last dollars of profit runs about 30 percent, counting federal, state, and self-employment tax (yours will differ, and your CPA can tell you what it is). A $48,000 deduction saves roughly $14,400. You spent $48,000 in cash to save $14,400, which leaves the equipment costing $33,600 after tax. That’s a fine deal if you were going to buy it anyway. It’s a poor one if you weren’t.
There’s a second wrinkle. Over the life of the equipment, you deduct its cost once either way. Bonus depreciation and Section 179 just move that deduction to the front. That’s valuable, since a tax break today beats one spread over years, but it’s a timing benefit, not free money. And if you sell the equipment later, some of what you deducted can come back as taxable income, which your CPA can explain when the time comes. Our year-end tax planning guide puts this purchase in context with the other eleven moves.
Bonus depreciation and Section 179 in 2026
The 2025 tax law made 100% bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025, so it no longer shrinks each year. Property bought under a binding contract before January 20, 2025 stays on the old phase-down, which is 20 percent for 2026, per Warren Averett’s summary. That matters if you signed for a machine in 2024 and it’s only arriving now. We cover the wider set of changes in what the 2025 tax law means for small businesses.
Section 179 is a separate election. For 2026 the maximum deduction is $2,560,000, and it begins to phase out once your qualifying purchases exceed $4,090,000, according to the IRS’s Revenue Procedure 2025-32. Section 179 is generally limited by your business’s taxable income, while bonus depreciation isn’t, and your CPA will choose the combination that fits your year.
The figures worth keeping handy:
| Item | 2026 figure |
|---|---|
| Bonus depreciation | 100%, permanent for qualifying property acquired and placed in service after January 19, 2025 |
| Section 179 maximum deduction | $2,560,000 |
| Section 179 phase-out begins | Above $4,090,000 of qualifying purchases |
| Heavy SUV Section 179 cap | $32,000 |
| Passenger vehicle first-year cap | $20,300 with bonus, $12,300 without |
Placed in service by December 31
Signing the invoice or paying for the equipment doesn’t earn the 2026 deduction. Being placed in service does: delivered, installed, and ready to do the job it was bought for. December 31, 2026 is the last day for that. Say a restaurant orders a walk-in cooler in November. It arrives December 22, but the electrician can’t wire it until January 6. The cooler wasn’t ready to use in 2026, so the deduction belongs to 2027, even though the money left the account in December.
So work backward from the calendar. Ask the vendor for a firm delivery and installation date in writing, and build in slack for the holidays. Keep the delivery receipt, the installation invoice, and a dated photo. Then record the in-service date in your fixed-asset list, because that date, not the invoice date, is what your CPA needs for the depreciation schedule. The IRS’s Publication 946 covers the details.
Vehicles: the heavy SUV rule
Vehicles have their own caps, which is why a heavy SUV and a sedan don’t behave alike. For a passenger vehicle in 2026, the first-year limit is $20,300 with bonus depreciation, or $12,300 without, then $19,800 in year two, $11,900 in year three, and $7,160 after that, according to the Journal of Accountancy’s summary of the IRS limits. Heavier vehicles, those rated over 6,000 pounds gross vehicle weight, follow a different path. Section 179 is limited to $32,000 for these SUVs, but 100% bonus can cover the rest when business use is over 50 percent.
Say a contractor buys a $70,000 SUV rated at 7,000 pounds and uses it 80 percent for business. The business share is $56,000: $32,000 through Section 179 and the remaining $24,000 through bonus. A mileage log is what proves that 80 percent, so start one on day one. Your CPA should confirm the weight rating, the use percentage, and the math before you sign.
Financing it: the deduction still works
Buying with a loan or a dealer’s financing generally doesn’t shrink the deduction. Suppose you finance the $48,000 package with $8,000 down and a five-year loan. You may still be able to deduct the full $48,000 in 2026 (subject to the limits above), while paying it off over sixty months. The interest is a separate expense, deducted as you pay it. What the deduction doesn’t do is help your cash. The loan payments start next month, and the tax savings show up later, in lower estimated payments or a smaller balance due. Before you sign, run the payments through a forecast. Our cash flow management guide shows how to do that without a finance degree.
When to say no
The best reasons to skip a year-end purchase are unglamorous. You don’t need it yet. The payments would squeeze your cash. Or your profit is small this year, in which case a large deduction saves little now and might be worth more spread across later, busier years. Your CPA can model both. Also pause if you might sell the equipment or the business soon, since some of the deduction can be recaptured, or if you’re not sure it can be delivered and running by December 31. And if you’re still wrapping up an extended 2025 return due October 15, 2026, remember that equipment placed in service last year belongs on that return, not this one. Our note on what to do if you extended your 2025 return covers that deadline.
Frequently asked questions
Do I have to use Section 179, or is bonus depreciation enough?
For most small businesses, 100% bonus depreciation alone can produce a full first-year deduction, and the two can be combined. Section 179 is generally limited by your business’s taxable income while bonus depreciation isn’t, so the right mix depends on your profit. Ask your CPA to model both before year-end.
What records should I keep for an equipment purchase?
Keep the invoice, proof of payment or the loan paperwork, the delivery and installation records that show when it was placed in service, and, for vehicles, the log that supports business use. Add the asset to your fixed-asset list the same week, while everyone still remembers the dates.
Is the 100% deduction available for everything I buy?
Only for qualifying property, and the dates matter: acquired and placed in service after January 19, 2025. Property under a binding contract signed before January 20, 2025 stays on the old phase-down, at 20 percent for 2026. Your CPA can tell you whether a specific purchase qualifies.
Where to go from here
If you’re weighing a purchase, do three things this week: get a profit estimate, confirm the delivery date in writing, and ask your CPA to price out the tax effect. A clean ledger makes all three faster. If you’d rather not build that estimate yourself, that’s the kind of work a BooXkeeping team does every month, and a free consultation is an easy way to start the conversation.
Reviewed for tax year 2026.
BooXkeeping is a bookkeeping company, not a CPA firm or a law firm. This article is general information for business owners, not tax, legal, or financial advice. Rules change and your situation is specific, so confirm anything here with your CPA or attorney before acting on it.