Section 179 and Bonus Depreciation in 2026 — Financing Strategy
Section 179 lets you expense up to $1.22M of qualifying equipment in year one, even when 100% financed. For a profitable operator in the 37% bracket, a $500k financed equipment purchase generates $185k of cash tax savings — often more than the year-one financing payment.
Section 179 limits for 2026
Maximum deduction: $1.22M. Phaseout begins at $3.05M of total qualifying purchases. Phases out dollar-for-dollar above the threshold. Cannot create a net operating loss — limited to taxable income.
Bonus depreciation
40% in 2026, dropping to 20% in 2027 before sunsetting. Applies above the Section 179 cap and to new or used qualifying property. No taxable-income limit — can create an NOL.
Financing interaction
Both deductions are available on financed equipment from day one. A $500k purchase, $0 down, 60-month finance: first-year deduction $500k × 37% bracket = $185k tax savings vs ~$110k of first-year financing payments. Net positive cash position in year one.
Qualifying property
Most tangible business property with a useful life under 20 years: machinery, vehicles over 6,000 lbs GVWR, computers, off-the-shelf software, qualified improvement property. Real estate is excluded.
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