Andrew Sedlacek, CPA17 min read
The 2026 Section 179 limits are set: a $2,560,000 maximum deduction, a phase-out that begins at $4,090,000 of Section 179 property placed in service, and a $32,000 cap on heavy SUVs. Both IRS Publication 946 and Rev. Proc. 2025-32 confirm all three figures for tax years beginning in 2026.
This guide walks through what changed from 2025, the eligibility tests, the three limits in the order they apply, how Section 179 interacts with 100 percent bonus depreciation, and a worked example of the phase-out. Figures are current for tax years beginning in 2026.
For tax years beginning in 2026:
Side by side with 2025, per Publication 946:
| Item | Tax years beginning in 2025 | Tax years beginning in 2026 |
|---|---|---|
Maximum deduction | $2,500,000 | $2,560,000 |
Phase-out begins | $4,000,000 | $4,090,000 |
Heavy SUV cap | $31,300 | $32,000 |
Is Section 179 changing in 2026? Not structurally. These are inflation adjustments under Section 179(b)(6). The One Big Beautiful Bill Act set the $2,500,000 and $4,000,000 amounts in Section 179(b)(1) and (2) and moved their indexing base to calendar year 2024, with adjustments beginning in tax years after 2025. The $25,000 SUV amount in Section 179(b)(5)(A) predates OBBBA and has been indexed from a 2017 base since 2019. Rev. Proc. 2025-32 publishes all three amounts for tax years beginning in 2026.
One detail worth catching on review: the limits key off the tax year beginning, not the calendar year. A fiscal-year filer whose tax year began in 2025 applies the 2025 amounts to property placed in service in calendar 2026.
Eligibility is three conditions under Section 179(d)(1), and all three must be met. Within the first two, the alternatives are "or"; between the three, they are "and."
Property described in Section 50(b), other than paragraph (2), is excluded. "Purchase" also has three carve-outs under Section 179(d)(2): acquisitions from specified related persons under the Section 267 and Section 707(b) tests, acquisitions between component members of a controlled group, and acquisitions where basis carries over from the transferor or is stepped up from a decedent. The family definition is narrower than usual: Publication 946 counts only a spouse, ancestors, and lineal descendants, so a purchase from a parent fails while a purchase from a sibling can qualify. Same asset, wrong seller or wrong basis, no election.
Mixed-use property has its own gate, and it is not limited to listed property. Under Publication 946, property used for both business and nonbusiness purposes qualifies for Section 179 only if business use exceeds 50 percent in the placed-in-service year, and the cost eligible for the election is the total cost multiplied by the business-use percentage.
Timing turns on one test for Section 179 and two for bonus. Section 179(a) allows the deduction for the year the property is placed in service, and the phase-out under Section 179(b)(2) counts cost placed in service that year. Bonus depreciation adds an acquisition-date test that Section 179 does not have. Notice 2026-11 applies the existing rules in Reg. 1.168(k)-2(b)(5) with January 19, 2025 substituted for the old September 27, 2017 date. The headline rule: property is not treated as acquired after the date a written binding contract for it was entered into. For property bought under such a contract, the acquisition date is the latest of the contract date, the date it became enforceable under state law, the end of any cancellation periods, and the satisfaction of any contingency clauses. Property bought without a written binding contract is treated as acquired when the taxpayer paid or incurred more than 10 percent of its cost, and self-constructed property when physical work of a significant nature begins, with a parallel 10 percent safe harbor. So ordering a machine in December and taking delivery in January is a Section 179 problem. A binding contract signed January 15, 2025 is a bonus problem with a definite answer: if that property is first placed in service in 2026, it takes 20 percent bonus under the old schedule, not 100 percent.
Run the limits in this sequence, because each one operates on the output of the last:
The income figure is the business-income definition and adjustments in Publication 946, not revenue, EBITDA, or unadjusted book profit. Getting that number right is taxpayer-specific work, and the worked example below takes it as a supplied input rather than deriving it.
Bonus depreciation is 100 percent and permanent for qualified property acquired after January 19, 2025, under OBBBA Section 70301, per Notice 2026-11 and IR-2026-06, with the Form 4562 instructions confirming the 100 percent allowance for qualified property acquired and placed in service after that date. Property acquired before January 20, 2025 and first placed in service in 2026 does not get the new rate; it remains on the old Section 168(k)(6) phase-down, which reaches 20 percent for 2026 (40 percent for long production period property and certain aircraft). The acquisition-date test above decides which regime applies.
The two regimes differ in mechanics:
| Feature | Section 179 | 100% bonus depreciation |
|---|---|---|
How it applies | Elective, item by item | Automatic for qualified property; election out applies by property class (Section 168(k)(7)) |
Dollar cap | $2,560,000 (2026) | None |
Spending phase-out | Begins at $4,090,000 | None |
Income limitation | Yes, with carryforward | No dollar-cap income ceiling in Section 179's sense |
Timing test | Placed in service | Acquired and placed in service |
Ordering is settled, and Publication 946 states it: the special depreciation allowance is taken after any Section 179 deduction and before regular MACRS.
Why elect Section 179 at all when bonus is 100 percent? Precision. Section 179 lets you target one asset, or a portion of one asset's cost, rather than an entire asset class. A client who wants to expense a single machine while preserving regular depreciation on everything else in the class can do that with a Section 179 election in a way bonus does not allow without electing out class-wide.
Can you write off 100 percent of a 6,000-pound vehicle? Sometimes, and not from Section 179 alone.
The $32,000 cap applies to a four-wheeled vehicle primarily designed to carry passengers on public roads, rated above 6,000 and not above 14,000 pounds gross vehicle weight. The test is the gross vehicle weight rating, not curb weight or actual loaded weight. Publication 946 lists the exceptions, which fall outside the cap:
Under Section 179(b)(5)(A), $32,000 is the maximum cost of a heavy SUV that can be taken into account for the election, not an automatic deduction. The actual deduction is still subject to the business-use percentage, the overall dollar and phase-out limits, and the income ceiling. Remaining business-use basis can generally be recovered under 100 percent bonus, provided the vehicle was acquired after January 19, 2025, meets the bonus acquisition requirements, and passes the more-than-50 percent qualified business use test. Passenger automobiles at or below the 6,000-pound threshold are subject to the Section 280F caps instead. The 2026 amounts are published in Rev. Proc. 2026-15; they are outside this article's scope, so pull that document before advising on a lighter vehicle.
Listed property must be used predominantly, meaning more than 50 percent of total use, for qualified business use to qualify for Section 179 or bonus. Property that fails the test in the placed-in-service year qualifies for neither and is depreciated straight line over the ADS recovery period (Publication 946).
Publication 946 sets out two distinct recapture computations, and which one applies turns on whether the asset is listed property:
The listed-property computation sweeps in bonus and regular depreciation; the general Section 179 computation does not, and it never applies to listed property whose use has dropped.
States vary in whether they conform to the federal Section 179 amounts and to 100 percent bonus depreciation, and this article makes no state-specific claim. The check is two documents: your state Department of Revenue's current-year conformity guidance, and the state's depreciation addback or modification schedule. Run both before projecting a state benefit, because a federal deduction that a state decouples from becomes a multi-year modification exercise, not a one-year write-off.
The facts below are fictional and constructed for illustration. They are not client experience.
Ridgeline Fabrication LLC is a calendar-year taxpayer classified as a C corporation. It places $4,340,000 of qualifying manufacturing equipment in service in its tax year beginning January 1, 2026, purchased from unrelated parties and used entirely in the business. Assume its correctly computed Section 179 active-business taxable-income ceiling is $1,850,000; that ceiling is a supplied input, not derived here. No prior-year carryforward exists. Vehicles, qualified-real-property elections, pass-through owner limits, bonus depreciation, and total first-year depreciation are outside this illustration.
| Step | Item | Amount | Authority |
|---|---|---|---|
1 | Total Section 179 property placed in service | $4,340,000 | Section 179(b)(2) counts cost placed in service |
2 | 2026 dollar limit before reduction | $2,560,000 | |
3 | Cost above the $4,090,000 threshold | $250,000 | |
4 | Reduced dollar limit ($2,560,000 less $250,000) | $2,310,000 | |
5 | Assumed election up to the reduced limit | $2,310,000 | |
6 | Taxable-income ceiling, supplied as an assumption | $1,850,000 | |
7 | Section 179 allowed in 2026 (lesser of steps 5 and 6) | $1,850,000 | |
8 | Disallowed by income limit, carried forward | $460,000 |
The teaching point: the spending phase-out and the income limitation are different tests. The phase-out reduces the maximum available election. The income limitation defers part of the election actually made, and the deferred $460,000 carries forward subject to the limits in the year it is used.
On identical facts in a tax year beginning in 2025, the reduced dollar limit would be $2,500,000 less $340,000 of cost above the $4,000,000 threshold, or $2,160,000, and the SUV cap would be $31,300 (Publication 946).
This is not a full return calculation, and it is not a recommendation to maximize Section 179.
The election is made on Part I of Form 4562, listed property in Part V first. Per Publication 946, it can be made on an original return, timely filed or not, or on an amended return filed within the time prescribed by law that specifies the item and portion of cost elected. It can be revoked without IRS approval on such an amended return, and the revocation is irrevocable. Records must specifically identify each item of elected property and show how it was acquired, from whom, and when it was placed in service.
For pass-throughs, the limits apply at both the entity and owner levels. A partner adds the Section 179 amount allocated on the K-1 to any non-partnership Section 179 costs before applying the dollar limit. The phase-out works differently: in testing the partner's own $4,090,000 threshold, the cost of property the partnership placed in service is not attributed to the partner (Reg. 1.179-2(b)(3)(i)).
Mistakes that surface in review:
For the pass-through side of OBBBA-era planning, see The QBI deduction, explained.
Verifying figures like these across Publication 946, a Revenue Procedure, and interim Notices is exactly the kind of research that eats a planning afternoon. Marble answers tax research questions against the underlying authorities and drafts the work product, memos, client letters, and regulatory responses, with authorities cited for your review. Sign up for Marble.
For tax years beginning in 2026, the maximum Section 179 deduction is $2,560,000, reduced dollar for dollar by the cost of Section 179 property placed in service above $4,090,000, with a $32,000 cap on heavy SUVs. The figures come from Rev. Proc. 2025-32 and IRS Publication 946.
Sometimes, and not from Section 179 alone. A vehicle rated at exactly 6,000 pounds or less generally falls under the separate Section 280F passenger-automobile caps, not the heavy-SUV rule. A qualifying heavy SUV rated at more than 6,000 and not more than 14,000 pounds GVWR is capped at $32,000 under Section 179 for 2026, but remaining business-use basis can generally be recovered under 100 percent bonus, and certain work-configured vehicles escape the cap entirely.
Not structurally. The 2026 amounts are inflation adjustments. The maximum rises from $2,500,000 to $2,560,000 and the phase-out threshold from $4,000,000 to $4,090,000, the first indexing of the amounts the One Big Beautiful Bill Act set in Section 179(b)(1) and (2). The SUV cap rises from $31,300 to $32,000 under the Section 179(b)(5)(A) adjustment that predates OBBBA.
It depends on the acquisition date. For qualified property acquired after January 19, 2025, the rate is 100 percent and permanent under OBBBA, as confirmed by Notice 2026-11 and IR-2026-06. Property acquired before January 20, 2025 but placed in service in 2026 stays on the pre-OBBBA phase-down under Section 168(k)(6): 20 percent for most property, 40 percent for certain long production period property and aircraft.
Permanent 100 percent bonus depreciation for qualified property acquired after January 19, 2025, and inflation-adjusted Section 179 limits of $2,560,000 and $4,090,000. Ordering is unchanged: Section 179 first, then the special depreciation allowance, then regular MACRS.
For Section 179, the 2026 dollar limit is $2,560,000, phasing out above $4,090,000 of property placed in service. Passenger automobiles subject to Section 280F have separate annual caps for vehicles placed in service in 2026, published in Rev. Proc. 2026-15.
Qualified property under the bonus rules, generally MACRS property with a recovery period of 20 years or less, acquired and placed in service after January 19, 2025, with acquisition dates tested under the written-binding-contract rules in Notice 2026-11. Listed property must also pass the more-than-50 percent business-use test.
Yes, if acquired by purchase from an unrelated party for use in the active conduct of a trade or business. Section 179 has never required the property to be new; it requires that the seller not be a related person under the Section 267 and Section 707(b) tests.
Not at the aggregate level, but it can within a single activity. Section 179(b)(3)(A) caps the deduction at the taxpayer's combined taxable income from the active conduct of all trades or businesses, which under Publication 946 includes wages. So a Section 179 deduction on Schedule C equipment can push that business into a loss if W-2 income or another business supplies enough active income to absorb it. Amounts above the aggregate ceiling are disallowed and carry forward rather than creating a loss. A loss that does result in one activity is then subject to the usual basis, at-risk, passive activity, and excess business loss rules.
Apply the layers in order: any Section 179 election first, then the special depreciation allowance on remaining basis, then regular MACRS on what is left, using the conventions and recovery periods in Publication 946. The worked example above shows the Section 179 layer.
This article is a general discussion of certain accounting and tax developments and related topics of interest and should not be relied upon as accounting or tax advice. If you require accounting or tax advice you should consult a qualified practitioner.
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