Section 179 Tax Incentive Can Reduce Short-Term Burden of Equipment Purchases

As 2026 winds down, it’s a good time for contractors to consider adding new or used equipment from EquipmentShare to grow their businesses in the new year. A tax incentive* could ease the financial burden of investing in your company.

Section 179 of the IRS tax code allows qualifying businesses to claim an immediate deduction for up to the full purchase price of depreciable assets, rather than spacing the deduction out over future years. That means you may be able to acquire equipment to help your business grow now with a smaller potential short-term impact on cash flow. 

Here’s what you need to know about Section 179.

What purchases qualify for Section 179?

Many types of new and used business equipment qualify for Section 179. The list includes machinery, certain vehicles that weigh more than 6,000 pounds, computers and software. The deduction must be filed for in the same year the equipment is acquired and put into use.

The last part is important. There can be some lag time between buying and receiving equipment. If your new equipment isn’t available for use by Dec. 31, it can’t be counted on this year’s tax filing.

To claim the Section 179 deduction, you need to fill out IRS Form 4562 and include it with your 2026 tax return.

How could tax incentives affect my bottom line?

Because Section 179 is intended for small and mid-sized businesses, there are limits to the maximum deduction. 

• In 2026, the most you can deduct is $2.56 million. 
• To receive the full deduction, the total amount of equipment purchased cannot exceed $4.09 million. 
• Every dollar spent over that $4.09 million threshold is a dollar less that can be deducted, and the deduction is fully phased out at $6.65 million.

There is an additional tax incentive that can help businesses of all sizes. It is called bonus depreciation, and it’s often used by companies that buy equipment that costs more than the Section 179 maximum deduction. In 2026, 100% bonus depreciation is available. That means after applying the Section 179 deduction, you may be able to fully expense the remaining cost of eligible equipment immediately, increasing your tax savings.

Example of how Section 179 works

Let’s say you purchase a used skid steer costing $50,000 and claim the Section 179 deduction. You deduct the entire purchase price of the machine on your 2026 tax return rather than spacing the deduction out over multiple years. 

That means you would subtract $50,000 from your company’s 2026 taxable income. The amount of your 2026 tax savings would depend on your federal tax rate. For example, at a 10% federal tax rate, your tax savings would be $5,000, and at a 35% federal tax rate, your tax savings would be $17,500. 

How do I know if Section 179 is right for my business?

Your business is unique, and depending on its size and growth timeline, it might make sense to get immediate tax relief or to spread out the savings over the life of your depreciating assets. Consult with your accountant or tax adviser to make sure you qualify for Section 179 and ensure you’re making the right financial decision for your business.

* Disclaimer: This article is for informational purposes only and should not be considered tax advice. 

— Check out EquipmentShare’s selection of new and used equipment.