When a business needs new equipment, the tax deduction can make the timing of the purchase more attractive. But we would never recommend buying an asset solely for the write-off. The business still spends the money, and a deduction recovers only a portion of that cost through tax savings.
For 2026, the two federal provisions to consider are Section 179 and bonus depreciation.
Section 179 allows a business to deduct the cost of qualifying property when it is placed in service, meaning it is ready and available for its intended business use. For tax years beginning in 2026, the maximum deduction is $2.56 million. That limit begins to phase out once qualifying purchases placed in service during the year exceed $4.09 million. The deduction is also limited by taxable income from active trades or businesses. [1]
Qualifying property acquired and placed in service after January 19, 2025, generally may be eligible for 100% bonus depreciation. Bonus depreciation does not have Section 179’s overall dollar limit or taxable income limit. That distinction can matter when a business has substantial capital purchases or expects a lower-income year. [2]
A Purchase Order Is Not Enough
For a calendar-year business, an asset generally must be placed in service by December 31, 2026 to generate a 2026 depreciation deduction. Paying a deposit or receiving an invoice before year-end does not, by itself, establish that date. If delivery or installation slips into January, the deduction may slip with it. [1]
We recommend keeping the invoice, delivery confirmation, installation records and fixed-asset schedule together. For assets with personal use, keep records supporting the business-use percentage as well.
Look at the Whole Transaction
Equipment, machinery, furniture, and business technology such as computers, printers and servers may qualify. Some vehicles may qualify as well, although separate deduction limits can apply. Eligibility and the deductible amount depend on the asset and how it is used in the business. State tax treatment may also differ from federal treatment.
Financing needs its own review. An eligible financed purchase may produce a depreciation deduction even though the business will make payments over time.
Before making a significant purchase, we look at the expected business use, the placed-in-service date, projected taxable income and cash flow. In some cases, taking the largest available deduction in 2026 makes sense. In others, keeping deductions for future years may produce a better result.
If equipment is already in your 2026 budget, now is the time to review the purchase and its tax treatment while there is still time to address delivery or installation delays.
Sources
[1] IRS Publication 946, How To Depreciate Property: https://www.irs.gov/publications/p946
[2] IRS, Treasury, IRS issue guidance on the additional first-year depreciation deduction: https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill
