2026 Tax Guide
Section 179 Deduction for Heavy Equipment
Deduct up to $2,560,000 on qualifying equipment purchases this year. Plus, 100% bonus depreciation is back — write off the full cost of your equipment in Year 1.
$2.56M
2026 Section 179 Deduction Limit
100%
Bonus Depreciation (Restored)
Dec 31
2026 Deadline to Place in Service
What is Section 179?
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment in the year it is purchased, rather than depreciating it over multiple years. For 2026, the maximum deduction is $2,560,000.
This means if you buy a $150,000 excavator and put it to work this year, you can deduct the entire $150,000 from your taxable income — not $30,000 per year over five years. The tax savings are immediate, and for many businesses, Section 179 significantly reduces the effective cost of equipment.
2026 Section 179 Limits
| Maximum Deduction | $2,560,000 |
| Phase-Out Threshold | $4,090,000 |
| Full Phase-Out | $6,650,000 |
| Bonus Depreciation Rate | 100% |
| SUV Deduction Cap | $32,000 |
| Deadline | December 31, 2026 |
The phase-out reduces the deduction dollar-for-dollar once total qualifying property exceeds $4,090,000. At $6,650,000 the Section 179 deduction is fully eliminated, though bonus depreciation still applies.
100% Bonus Depreciation is Back
One Big Beautiful Bill Act (Signed July 2025)
100% bonus depreciation has been permanently restored for qualifying property acquired after January 19, 2025. This reverses the TCJA phase-down that had reduced the rate from 100% to 80%, 60%, and 40% in prior years.
How bonus depreciation works with Section 179: Use Section 179 first (up to $2.56M), then apply 100% bonus depreciation to any remaining cost. Unlike Section 179, bonus depreciation has no dollar cap and can create a net operating loss (NOL) that carries forward to future years.
Example: Buying an Excavator
Your construction company purchases a used Caterpillar 320 excavator for $95,000 and puts it to work in 2026. Here's the tax impact:
Your actual tax savings depend on your business's tax bracket and situation. This example uses a 25% combined federal/state rate for illustration. Consult your tax advisor for your specific circumstances.
Heavy Equipment That Qualifies
Nearly all tangible business equipment with a recovery period of 20 years or less qualifies for Section 179. For the construction and earthmoving industry, this includes:
Earthmoving
Excavators, bulldozers, wheel loaders, track loaders, backhoes, motor graders, scrapers
Compact Equipment
Skid steers, compact track loaders, mini excavators, telehandlers
Trucks
Dump trucks, semi trucks, service trucks, water trucks, flatbeds
Lifting & Material Handling
Cranes, forklifts, aerial lifts, boom lifts, scissor lifts
Paving & Compaction
Pavers, rollers, compactors, milling machines
Trailers
Flatbed trailers, lowboy trailers, dump trailers, step decks
Processing
Crushers, screeners, generators, compressors
Attachments
Buckets, grapples, hammers, augers, thumbs, rippers
Both new and used equipment qualifies, as long as it is new to your business. Equipment must be used more than 50% for business purposes and placed in service by December 31, 2026.
Section 179 vs. Bonus Depreciation
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Dollar Cap | $2,560,000 | No limit |
| Can Create a Loss? | No — limited to taxable income | Yes — can create NOL |
| New Equipment | Qualifies | Qualifies |
| Used Equipment | Qualifies | Qualifies |
| Phase-Out | Begins at $4.09M | No phase-out |
| Best Strategy | Use Section 179 first (up to $2.56M), then apply bonus depreciation to the remaining cost. | |
Requirements to Claim Section 179
Business use over 50%
Equipment must be used more than 50% for business purposes. Personal-use portions are not deductible.
Placed in service this year
Equipment must be purchased AND placed in service by December 31, 2026. "Placed in service" means ready and available for use.
Purchased (not leased)
Equipment must be purchased outright or financed. Capital leases may qualify, but operating leases typically do not.
Not from related party
Equipment cannot be purchased from a spouse, ancestor, descendant, or corporation/partnership you control.
Filed on Form 4562
Claim the deduction on IRS Form 4562 (Depreciation and Amortization) with your business tax return.
Frequently Asked Questions
What is the Section 179 deduction limit for 2026?
The Section 179 deduction limit for 2026 is $2,560,000. This means businesses can deduct up to $2.56 million of the cost of qualifying equipment purchased and placed in service during the tax year. The deduction begins to phase out when total qualifying property exceeds $4,090,000.
Does heavy equipment qualify for Section 179?
Yes. Heavy equipment including excavators, bulldozers, wheel loaders, skid steers, cranes, forklifts, dump trucks, semi trucks, trailers, and virtually all construction and earthmoving machinery qualifies for the Section 179 deduction, provided it is used more than 50% for business purposes.
What is bonus depreciation in 2026?
The One Big Beautiful Bill Act (signed July 2025) permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025. This means you can deduct the full cost of eligible equipment in the first year, even above the Section 179 limit.
Can I deduct used equipment under Section 179?
Yes. Both new and used equipment qualify for the Section 179 deduction, as long as the equipment is new to your business and used more than 50% for business purposes. It does not need to be brand new from a manufacturer.
What is the difference between Section 179 and bonus depreciation?
Section 179 has a dollar cap ($2.56M in 2026) and is limited to your business taxable income. Bonus depreciation has no dollar cap and can create a net operating loss. Most businesses use Section 179 first, then apply bonus depreciation to any remaining cost above the Section 179 limit.
When is the deadline to claim Section 179 for 2026?
Equipment must be purchased AND placed in service by December 31, 2026 (for calendar year filers). "Placed in service" means the equipment is ready and available for use in your business — it does not need to be actively in use by that date.
Buy Equipment Before December 31 and Write It Off This Year
Browse over 2,500 pieces of heavy equipment with fair market pricing. Finance your purchase and deduct the full cost under Section 179.
Tax information is for general reference only. Consult your tax advisor for specific guidance applicable to your situation. Proxy Equipment is not a tax advisory firm and does not provide tax advice.