Section 179 Tax Deduction: All Your Questions Answered 

For business owners, contractors, and high-income professionals, one of the most powerful tools to lower taxable income is the Section 179 tax deduction. It allows you to write off the full purchase price of qualifying equipment and vehicles in the year you place them in service, lowering taxable income and freeing up cash flow. 

But Section 179 is not as simple as “buy a truck and get a deduction.” There are limits, qualifications, risks, and strategies to consider before you decide. In this blog, you’ll learn how Section 179 works in 2025, what vehicles qualify, the limits you need to know, and whether it makes sense for your business. 

What is the Section 179 Tax Deduction? 

Section 179 is part of the Internal Revenue Code that allows businesses to deduct the full cost of eligible equipment and vehicles purchased and put into use during the tax year. Instead of depreciating the cost of the asset over several years, Section 179 lets you accelerate the deduction. 

This deduction is designed to encourage businesses to reinvest in themselves by purchasing tools, machinery, vehicles, and other assets that keep operations running. 

Example of Section 179 deduction 

A contractor purchases a $90,000 work truck in 2025, weighing 7,000 pounds. The truck is used 100 percent for business. The Section 179 deduction allows the full $90,000 to be claimed, potentially reducing taxes by $28,800 if the contractor is in the 32 percent tax bracket. 

This example shows why contractors, real estate professionals, and service-based operators often lean on Section 179 as part of their tax planning strategy. 

Who Qualifies for Section 179? 

Most businesses can qualify, including LLCs, S Corps, partnerships, and sole proprietors, as long as they are profitable and actively using the equipment for business purposes. 

To qualify: 

• The asset must be purchased and placed in service in the same tax year. 

• The asset must be used more than 50% for business. 

• The business must generate enough taxable income to take advantage of the deduction. 

That said, your income level and entity type affect how much you benefit from Section 179.  

2025 Section 179 Deduction Limits 

For 2025, the Section 179 deduction limit is $1.22 million. That means you can deduct up to $1.22 million in new or used qualifying assets. 

However, once your total purchases exceed $3.05 million, the deduction begins to phase out. This implies that Section 179 is particularly valuable for small and mid-sized businesses, but large capital spenders may hit the cap. 

Section 179 Tax Deduction For Vehicles

Vehicles are one of the most common subjects around Section 179. In 2025, these vehicles qualify for section 179 deductions: 

• Passenger vehicles under 6,000 pounds GVWR (like sedans, small SUVs): Limited to $20,400 in Section 179 deductions. 

• Heavy SUVs, trucks, and vans over 6,000 pounds GVWR but under 14,000 pounds: Eligible for a 100% write-off in the year placed in service, up to the annual limit. 

• Vehicles designed with no personal use (like delivery vans or box trucks): Eligible for the full Section 179 deduction with no cap. 

Hence, you can potentially write off 100% of a heavy vehicle like an F-250 or Escalade, but the IRS is very strict on business-use requirements. If you plan to use the vehicle for personal errands, you risk losing the full deduction. 

Can You Write Off 100% of a 6,000 lb Vehicle? 

Yes, if the vehicle is over 6,000 pounds and used more than 50% for business, you can deduct the entire purchase price in the first year based on the percentage of business use. This is popularly known as the “SUV loophole.” 

For example, if you buy a $70,000 SUV weighing 6,200 pounds and use it 80 percent for business and 20 percent for personal purposes. In this case, you can deduct $56,000 in 2025. 

However, keep in mind that this is not “free money.” Your asset is likely to depreciate in value, you still must pay for the vehicle, and if your business income is not high enough, the deduction may not provide as much benefit as expected. 

Section 179 vs Bonus Depreciation 

Here’s what you should know about how Section 179 compares to bonus depreciation. 

• Section 179: Lets you pick and choose which assets to deduct, limited by taxable income and the annual cap. 

• Bonus depreciation: Allows 100% first-year depreciation in 2025 for assets placed in service after January 19, 2025; applies automatically, and can create a loss.  

Many businesses combine both strategies. For example, you may use Section 179 up to your taxable income, then apply bonus depreciation on top. Attracct’s tax experts can help determine the most effective approach for your situation. 

Disadvantages and Risks of Section 179 

While Section 179 provides significant benefits, there are potential downsides. 

1. Audit risk: The IRS closely watches Section 179 claims on vehicles. If the business use drops below 50% later, you may have to recapture deductions. 

2. Cash flow strain: Don’t buy assets you don’t need just for the write-off. The deduction doesn’t justify a purchase if it puts financial stress on your business. 

3. State tax differences: Not all states follow federal Section 179 rules. For example, some limit or disallow vehicle deductions. Always check your state’s rules. 

4. Future tax planning: Taking a full write-off now means you won’t have depreciation in future years to offset income. 

Additional Considerations 

Financing vs Cash Purchases 

You can claim Section 179 whether you pay cash or finance the purchase. The deduction applies to the full purchase price or financed amount, provided the asset is placed in service and used for business during the tax year. Financing can be a strategic option for businesses that want to preserve cash while still claiming the deduction. 

Audit Red Flags 

Common triggers for IRS scrutiny include claiming luxury vehicles that are used primarily for personal purposes, overstating business-use percentages, and failing to keep proper documentation such as mileage logs or invoices. Careful recordkeeping is essential to avoid potential audits. 

State-Level Differences 

Some states do not conform fully to federal Section 179 rules. California, for example, has different limits and depreciation rules, which can create unexpected state tax liabilities if not accounted for. Business owners should always check local regulations before planning large asset purchases. 

The Process of Claiming Section 179 

To claim the deduction, follow these steps: 

1. Purchase and place the asset in service during the tax year. 

2. Keep detailed documentation of the purchase, financing, and usage. 

3. File IRS Form 4562 with your return to elect the deduction. 

4. Track business use percentage carefully, especially for vehicles. 

When Section 179 Makes Sense (and When It Doesn’t) 

Section 179 isn’t one size fits all; it’s viability depends on your business income, profitability, need, and intention. Section 179 is most effective when: 

• The business is profitable and can use deductions to offset taxable income. 

• The asset is genuinely needed for business operations. 

• Accurate records exist to support business use. 

These are the scenarios when section 179 is less effective: 

• Purchases are made solely to claim the deduction. 

• Taxable income is too low to benefit fully. 

• Assets will be used primarily for personal purposes. 

Use Section 179 Strategically 

The Section 179 tax deduction can be a game-changer for contractors, real estate professionals, and other business owners. But like most tax strategies, the real value comes from using it wisely. 

Before you make a big purchase, consider your profitability, your future tax needs, and the IRS rules. In many cases, combining Section 179 with bonus depreciation and other deductions creates the most efficient result. 

If you’re considering a vehicle or equipment purchase in 2025, a conversation with an advisor can help you avoid mistakes and maximize your tax savings. Talk to the experts today. 

FAQs 

1. What is the maximum Section 179 deduction for 2025? 
For 2025, the maximum deduction is $1.22 million. The deduction begins to phase out when total qualifying purchases exceed $3.05 million. 

2. Can I claim Section 179 if my business made a loss this year? 
No. Section 179 can only offset taxable income. If your business has a loss, you cannot use the deduction in the current year, but it can be carried forward to future years. 

3. Do used assets qualify for Section 179? 
Yes. Both new and used equipment and vehicles qualify as long as they are new to your business and placed in service during the tax year. 

4. Can I claim Section 179 for personal vehicles? 
No. Only assets used more than 50 percent for business purposes are eligible. Using a vehicle for personal errands can reduce or eliminate the deduction. 

6. Can I finance a purchase and still claim Section 179? 
Yes. You can claim Section 179 whether you pay cash or finance the purchase, provided the asset is placed in service and used for business during the tax year. 

7. How do I claim Section 179 on my tax return? 
Claim the deduction by filing IRS Form 4562 with your tax return. Ensure you maintain detailed documentation of purchase, financing, and business use to support the deduction in case of an audit.