Section 179 and Equipment Financing: What Business Owners Should Know

Section 179 of the tax code allows qualifying businesses to deduct the full purchase price of eligible equipment in the year it's placed in service, rather than depreciating it over several years. Combined with bonus depreciation on any remaining basis, it can make financed equipment considerably cheaper on an after-tax basis than the sticker price suggests.

Financing and Section 179 both work in your favor

One detail that surprises a lot of business owners: you don't need to pay cash for equipment to claim Section 179. As long as the equipment is purchased (not leased under certain lease structures) and placed in service during the tax year, you can finance the purchase and still deduct the full qualifying amount — meaning the tax benefit can arrive well before the equipment is paid off.

What to keep in mind

• Section 179 limits and phase-out thresholds are set annually and adjusted for inflation — confirm the current-year figures with your tax advisor or IRS.gov before relying on them.
• The equipment must be placed in service (not just ordered or paid for) by the end of your tax year to qualify for that year's deduction.
• Certain lease structures qualify for Section 179 treatment and others don't — this is worth confirming with your accountant before choosing a lease vs. a loan.
• Section 179 is a tax strategy, not a substitute for tax advice — this article is for general information only.

Use our Section 179 calculator to estimate the potential tax savings on your next equipment purchase, then talk to your tax advisor to confirm how it applies to your specific situation.