Section 179 & Bonus Depreciation
Deduct 100% of Equipment Purchases in Year One
Section 179 and Bonus Depreciation allow businesses to immediately deduct the full cost of qualifying equipment, vehicles, and property improvements in the year of purchase—rather than depreciating them over multiple years. For 2024, Section 179 allows up to $1,220,000 in immediate deductions, while Bonus Depreciation provides an additional 60% first-year deduction on remaining qualified property. This powerful combination accelerates tax deductions and improves cash flow for growing businesses.
See Your Potential Savings
Based on a typical client profile for this strategy
Real Results: Client Success Story
"A construction company purchases $500,000 in heavy equipment (excavators, trucks, trailers) and $200,000 in qualified leasehold improvements. Using Section 179, they deduct the full $700,000 in year one instead of depreciating over 5-39 years. At a 37% marginal rate, this generates $259,000 in immediate tax savings."
*Illustrative scenario for educational purposes. Tax savings depend on individual circumstances, income level, entity structure, and proper implementation. Consult with a tax professional to determine eligibility.
Do You Qualify? Quick Self-Assessment
This strategy may be right for you if:
Check 3 or more? You may be a good candidate for this strategy. Schedule a free consultation to calculate your potential savings.
Investment Levels
- Current situation analysis
- Tax reduction opportunities
- Action item roadmap
- Follow-up summary
- Full financial analysis
- Multi-year projections
- Entity optimization
- Implementation support
- Quarterly planning calls
- Transaction review
- Legislative updates
- Priority access
- Structure analysis
- Document preparation
- IRS filings
- Transition planning
Related Strategies
Explore the Details
For those who want to understand the full picture
Real-World Example: Before & After
A construction company purchases $500,000 in heavy equipment (excavators, trucks, trailers) and $200,000 in qualified leasehold improvements. Using Section 179, they deduct the full $700,000 in year one instead of depreciating over 5-39 years. At a 37% marginal rate, this generates $259,000 in immediate tax savings.
BEFORE Strategy
AFTER Strategy
The entire $700,000 equipment purchase is deducted in year one using Section 179, reducing taxable income immediately. This is a timing benefit—total deductions are the same but accelerated. Deduction cannot create a loss (limited to taxable income). Bonus depreciation can create losses and has no dollar limit.
IRS Authority & Professional References
Key Benefits
- Immediate 100% deduction of qualifying equipment costs
- Significant tax savings in the year of purchase
- Improved cash flow through accelerated deductions
- Section 179 now applies to qualified improvement property
- Can deduct heavy SUVs up to $30,500 in 2024
- No minimum holding period required
Requirements & Risks
Requirements:
- •Property must be purchased (not leased) for business use
- •Must be placed in service during the tax year
- •Section 179 limited to $1,220,000 (2024) and phases out above $3,050,000
- •Property must be used more than 50% for business
- •Cannot create or increase a net operating loss (Section 179 only)
- •Vehicles have special limits under IRC § 280F
Risks to Consider:
- !Section 179 deduction cannot exceed business income
- !Recapture applies if business use drops below 50%
- !Bonus depreciation is phasing down (40% in 2025, 20% in 2026)
- !May not benefit businesses with net operating losses
- !State conformity varies—some states don't allow full deduction
- !Planning required to optimize between Section 179 and bonus
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