IRC §179

Where this comes from

Section 179 dates to 1958 and was built as a small business benefit. The idea is simple: instead of spreading the cost of equipment over years of depreciation, a business can elect to deduct it in the year the property goes to work.

Congress has raised the dollar limits many times. The current statute, as amended by the 2025 OBBBA law, sets the cap at $2,500,000 with a phase-out beginning at $4,000,000 of total qualifying purchases, both indexed for inflation going forward.

What it established

The election covers qualifying tangible personal property and certain other property bought for active business use. The cap and phase-out keep the benefit aimed at small and mid-size buyers: a company that places many millions of dollars of equipment in service loses the deduction entirely.

There is also an income limit. The section 179 deduction cannot exceed the taxable income from your active trades or businesses for the year. Whatever you cannot use carries forward to later years.

For real estate, the statute includes a useful add-on. Qualifying property can include certain improvements to nonresidential buildings already in service, specifically roofs, heating, ventilation, and air conditioning property, fire protection and alarm systems, and security systems.

How it shows up in a study

A study identifies the kinds of tangible personal property that section 179 can cover, so the election becomes one more tool for front-loading deductions on the short-life items. For a nonresidential building owner replacing a roof or an HVAC system, section 179 can sometimes expense work that would not qualify for bonus depreciation because of its long recovery period.

In practice, the choice between section 179, bonus depreciation, or regular MACRS is a planning decision made return by return. The study supplies the asset detail; the tax preparer picks the mix that fits the owner's income picture.

What it does not mean

Section 179 is not available for most rental real estate held by passive investors. The property must be used in an active trade or business, and the income limit means a year with little business income supports little current deduction.

It also does not cover the building itself or residential rental property improvements under the special building-improvement add-on, which is limited to nonresidential property and the listed systems. For most cost segregation work on rentals, bonus depreciation does the heavy lifting and section 179 plays a supporting role.