Section 179 in Publication 946: $2,500,000 expensed in year one, and the four limits that take it back

What it says#

Publication 946, How To Depreciate Property, is the IRS's plain-language manual for recovering the cost of business property. The edition on IRS.gov is marked "For use in preparing 2025 Returns." Chapter 2 covers the section 179 deduction, which the publication describes this way: you can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service, instead of recovering the cost by taking depreciation deductions.

To qualify, property has to clear four requirements. It must be eligible property, it must be acquired for business use, it must have been acquired by purchase, and it must not be property the publication lists as not qualifying. Eligible property is mostly tangible personal property: machinery and equipment, and property contained in or attached to a building other than structural components, which the publication illustrates with refrigerators, grocery store counters, office equipment, printing presses, testing equipment and signs. Off-the-shelf computer software counts. So does qualified section 179 real property if you elect to treat it as section 179 property, which reaches qualified improvement property and, separately, roofs, heating, ventilation and air-conditioning property, fire protection and alarm systems, and security systems placed in service after the building was first placed in service.

Then come the limits, and there are two of them in sequence. The dollar limit for tax years beginning in 2025 is $2,500,000, reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $4,000,000. The publication states the endpoint plainly: if the cost of your section 179 property placed in service during 2025 is $6,500,000 or more, you cannot take a section 179 deduction. For tax years beginning in 2026, the publication's "What's New" gives $2,560,000 and $4,090,000. Behind the dollar limit sits the business income limit: the total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Cost not deductible in one year because of that limit can be carried to the next year.

Partial business use has its own rule. When you use property for both business and nonbusiness purposes, you can elect the section 179 deduction only if you use the property more than 50% for business in the year you place it in service, and then you multiply the cost by the business-use percentage.

Listed property is treated separately in chapter 5. It includes passenger automobiles, business aircraft, any other property used for transportation unless it is an excepted vehicle, and property generally used for entertainment, recreation or amusement. Listed property must be used predominantly, meaning more than 50% of its total use, for qualified business use, or it gets no section 179 deduction and no special depreciation allowance, and MACRS depreciation must be figured on the straight line method over the ADS recovery period. Commuting is not business use. A separate cap applies to heavy vehicles: you cannot elect to expense more than $31,300 of the cost of any heavy sport utility vehicle rated at more than 6,000 pounds and not more than 14,000 pounds gross vehicle weight, placed in service in tax years beginning in 2025, rising to $32,000 for tax years beginning in 2026.

Finally, recapture. If in any year during the property's recovery period the percentage of business use drops to 50% or less, you include the recapture amount as ordinary income in Part IV of Form 4797 and increase the property's basis by that amount. For listed property, the excess depreciation rules in chapter 5 apply instead.

Who it applies to#

Any practice entity that buys equipment. The election is made on Part I of Form 4562, filed with the original return or with a timely amended return, and the publication warns that estates and trusts cannot elect the section 179 deduction at all.

The sentence in the pull-quote above is the one an owner with more than one location should read twice. The dollar limit is per taxpayer, not per practice, so a group of offices filing inside one return shares one $2,500,000 ceiling. Partnerships and S corporations have their own layer: the entity applies the limit, then the partner or shareholder applies it again to their own total, with special rules on what counts toward the $4,000,000 reduction.

Property does not qualify if it was acquired by gift or inheritance, from a related person, or from another component member of a controlled group. Related persons here means a narrower family list, spouse, ancestors and lineal descendants, with 50% substituted for 10%. Land and land improvements do not qualify; the publication lists paved parking areas and fences as examples. Property acquired only for the production of income, such as rental property when renting is not your trade or business, does not qualify either.

What changed#

The 2025 revision carries new dollar limits and a new relationship to bonus depreciation. Section 179 amounts are adjusted annually, and the publication now prints both years: $2,500,000 and $4,000,000 for tax years beginning in 2025, $2,560,000 and $4,090,000 for 2026, with the SUV cap moving from $31,300 to $32,000.

The larger change is next door. Publication 946's "What's New for 2025" records that Public Law 119-21 reinstated the 100% special depreciation allowance for certain qualified property acquired and placed in service after January 19, 2025, with an election to take 40% instead (60% for long production period property and certain aircraft) during the first tax year ending after January 19, 2025. The same section notes new section 168(n), an elective 100% allowance for qualified production property placed in service after July 4, 2025. Our entry on 100% bonus depreciation covers that law; the point here is that section 179 and bonus depreciation are different deductions with different limits that interact on the same purchase.

Where the source is#

Publication 946, How To Depreciate Property, is free on IRS.gov as an HTML publication and as a PDF, marked for use in preparing 2025 returns. Chapter 2, Electing the Section 179 Deduction, holds the qualifying rules, the dollar limits, the business income limit, the election and the recapture rules; chapter 5, Additional Rules for Listed Property, holds the business-use requirement and the passenger automobile rules. Form 4562 is where the election is made and Form 4797 is where recapture is reported, both linked above. There is no copyright or subscription limit on any of it. Nothing here is advice on your return: the numbers change by tax year, state conformity varies, and the decision is your CPA's.