How Section 179 Works

If you’ve bought or leased equipment for your business, you may qualify for a major tax break — even if you didn’t pay in full.

It’s called Section 179, and it lets you deduct the entire cost of qualifying equipment in the year you start using it. That means big savings come tax time.

But many small business owners miss out because they think depreciation is too complicated — or they don’t know how to apply it to leases.

This guide explains exactly how Section 179 works, what qualifies, how much you can deduct, and how to use it with equipment financing or leasing.

Let’s break it down so you can keep more of your money and make smarter purchases all year.

What Is Section 179?

Section 179 is part of the U.S. tax code.It lets small and mid-sized businesses deduct the full purchase price of qualifying equipment and software in the same year it’s put into use.

Instead of spreading the deduction out over several years through depreciation, Section 179 gives you the option to take it all upfront.

This applies to:

• Equipment you buy or lease
• New and used assets
• Business-use vehicles
• Software and technology systems

Why it exists: It’s meant to help small businesses invest in tools they need now — without being penalized by slow tax write-offs.

In short: If you buy or lease qualifying business equipment, Section 179 may let you write off the entire cost this year.

How Does Section 179 Work for Small Businesses?

Here’s the simple version If you buy or lease qualifying equipment, Section 179 lets you deduct the full cost in the year it’s put into use — even if you’re making payments over time.

That means you can

• Lease or finance equipment
• Start using it this year
• Deduct the full price on this year’s taxes
• Keep your cash flow strong while lowering your tax bill

Example

You finance a $25,000 trailer in October.Even if you’ve only made a few payments, you may be able to deduct all $25,000 on your current year’s return — as long as it’s in use before December 31.

You don’t need to wait five years to write it off. You get the benefit right away.

Bottom line:Section 179 helps small businesses reinvest, grow faster, and reduce taxable income now — not later.

What Qualifies for the Section 179 Deduction?

Most equipment used in your business can qualify for Section 179 — as long as it’s used for work and placed in service during the tax year.

Here’s what typically qualifies

Equipment That Qualifies

• Trucks, trailers, and vehicles used for business
• Heavy machinery (excavators, loaders, etc.)
• Commercial kitchen and restaurant equipment
• Office equipment (computers, printers, phones)
• Manufacturing tools and systems
• Software (if off-the-shelf and used in business)

Rules to follow

• The equipment must be used more than 50% for business
• It must be purchased or leased and put into service by December 31
• You must have taxable income to apply the deduction

Can used equipment qualify?

Yes — used equipment is eligible, as long as it’s new to you and meets the other rules.

Tip: If you’re leasing with a $1 buyout or lease-to-own plan, you may still qualify — even without buying it upfront.

How Much Can You Deduct?

Section 179 lets you deduct up to $1,220,000 in qualifying equipment purchases (for the 2024 tax year). That means you can write off the full cost of equipment — up to that limit — as long as it’s put into service during the year.

Key limits for 2024

• Maximum deduction: $1,220,000
• Spending cap: $3,050,000 (If you buy more than this, the deduction starts to phase out)
• Bonus depreciation: You may also claim additional depreciation after reaching the Section 179 limit

Example:

If you lease or buy $40,000 in business equipment and start using it this year, you can likely deduct the full $40,000 from your taxable income — even if you financed it.

That’s a potential savings of $8,000–$12,000+, depending on your tax bracket.

Important: You can’t deduct more than your business’s total taxable income. But unused amounts may carry over to next year.

How Section 179 Works with Equipment Leasing

You don’t have to buy equipment outright to use Section 179. In many cases, you can lease equipment and still deduct the full cost — if it’s the right type of lease.

Here’s how it works:

• You lease equipment using a $1 buyout or lease-to-own plan
• You put the equipment into service before December 31
• The IRS treats the lease as a purchase for tax purposes
• You can deduct the full cost — even if you’ve only made a few payments

This means you get the tax savings now, while spreading out your payments over time.

What kind of lease qualifies?

• $1 Buyout Lease
• Lease-to-own agreements
• Capital leases (not operating leases)

If your lease ends with ownership or transfer of title, it likely qualifies.

Always confirm with your tax advisor before claiming the deduction.

Why this matters: Leasing lets you hold onto your cash while still taking full advantage of Section 179 — making it a smart move for tax planning and business growth.

Real-World Example: Using Section 179 to Cut Your Tax Bill

Let’s say a contractor leases a $35,000 skid steer in October using a $1 buyout lease. They only make two monthly payments before the end of the year — around $2,000 total.

But here’s the advantage: Because it’s a lease-to-own agreement, they can deduct the full $35,000 under Section 179.

What does that mean?

• Their taxable income is reduced by $35,000
• If they’re in a 24% tax bracket, that’s $8,400 in tax savings
• They still get to spread payments over 3 years — keeping their cash flow strong

They didn’t have to pay upfront.They didn’t wait years for depreciation.And they kept more of their money to reinvest in the business.

This is why Section 179 is such a powerful tool — especially when paired with equipment leasing.

When to Use Section 179 vs Regular Depreciation

Both Section 179 and regular depreciation lower your tax bill.The difference is how fast you take the write-off.

With Section 179, you deduct the full cost of the equipment in the same year it’s placed in service.With regular depreciation, you spread the deduction out over several years (usually 3, 5, or 7 years, depending on the asset).

When Section 179 makes more sense

• You had a profitable year and want to reduce taxable income now
• You’re buying or leasing qualifying equipment for immediate use
• You want the biggest write-off this tax year
• You’re financing equipment and need to offset the expense

When regular depreciation may be better

• Your business didn’t make much profit this year
• You want smaller deductions spread out over time
• You’re buying high-dollar equipment and want to stay under Section 179 limits
• You expect to earn more in future years and want to defer deductions

Smart move: Many businesses use both — taking Section 179 on some assets, and depreciating others over time. Your accountant can help build a strategy that fits your goals.

Final Tips to Maximize Your Deduction

Section 179 can save you thousands — but only if you use it the right way. Here are a few tips to make the most of it:

1. Use the equipment before year-end

You only get the deduction if the equipment is put into service by December 31. Ordering it isn’t enough — it must be delivered and in use.

2. Keep it for business use

The equipment must be used more than 50% for business. Personal use disqualifies the deduction.

3. Choose a qualifying lease

If you’re leasing, make sure it’s a $1 buyout or lease-to-own. Operating leases usually don’t qualify.

4. Track everything

Save your lease agreement, delivery date, and payment history. You’ll need this for your tax records — and in case of an audit.

5. Work with your accountant

Section 179 is powerful, but it’s still a tax tool.Your CPA can help you apply it properly and combine it with other write-offs.

Don’t wait until tax season. Plan now — and lock in your deduction before the deadline.

Ready to Finance Equipment and Use Section 179?

Section 179 is one of the best ways to reduce your tax bill — and it’s even better when paired with smart equipment financing.

At Smart Business Credit, we help you:

• Lease or finance equipment with low monthly payments
• Use $1 buyout leases that qualify for Section 179
• Get approved fast, even if you’re just starting out
• Put your equipment to work before year-end

You don’t need perfect credit.You don’t need to pay upfront.You just need a plan — and a partner who knows how to make it work.

Let’s help you invest in the tools your business needs — and write it off this year.