Deductions
Section 179 deduction: limits, what qualifies and how to claim it on Form 4562
The Section 179 deduction lets a business expense qualifying property in the year it's placed in service. See the $2,500,000 limit for 2025, the $4,000,000 phase-out, SUV and car caps, the business income limit, recapture and how Form 4562 Part I works.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
Section 179 lets a business elect to expense part or all of the cost of qualifying property placed in service during the tax year and used more than 50% for business, instead of depreciating it over several years. Under the IRS Form 4562 instructions, the maximum deduction for tax years beginning in 2025 is $2,500,000, reduced dollar for dollar once the cost of Section 179 property placed in service tops $4,000,000. The election is made on Form 4562.
What the Section 179 deduction is
Normally a business recovers the cost of equipment through depreciation spread over several years. Section 179 lets it elect to expense part or all of the cost of Section 179 property in the year the property is placed in service.
Two conditions come first. The property has to be placed in service during the tax year, and it has to be used predominantly, meaning more than 50%, in the trade or business.
An estate or trust can't make the election. For taxpayers other than corporations, the election generally doesn't apply to property bought and leased to others, unless the taxpayer manufactured or produced it or the lease meets two short-lease tests in the IRS instructions.
Section 179 limits for 2025
The latest Form 4562 instructions cover tax years beginning in 2025. For those years, the maximum Section 179 expense deduction is $2,500,000.
The limit shrinks by the amount that the cost of Section 179 property placed in service during the year exceeds $4,000,000. Property placed in service by a spouse counts toward that total, even on a separate return.
The limits apply at more than one level. For a partnership, they apply to the partnership and to each partner. For an S corporation, they apply to the corporation and to each shareholder. All members of a controlled group are treated as one taxpayer. Married people filing separately split the dollar limit 50/50 unless they both elect a different split that adds up to 100%.
Scroll sideways to see all columns.
| Item | Tax years beginning in 2025 |
|---|---|
| Maximum Section 179 deduction | $2,500,000 |
| Phase-out starts when Section 179 property placed in service exceeds | $4,000,000 |
| Maximum Section 179 deduction for an SUV (over 6,000 and up to 14,000 lbs gross vehicle weight) | $31,300 |
| First-year depreciation and Section 179 cap, passenger automobile, no special allowance | $12,200 |
| Same cap, with the special depreciation allowance | $20,200 |
What property qualifies
Section 179 property is property acquired by purchase for use in the active conduct of a trade or business. The IRS lists these types.
- Tangible personal property, including cell phones, similar telecommunications equipment, and air conditioning or heating units
- Certain other tangible property used in manufacturing, production, extraction or research, or for bulk storage of fungible commodities
- Single purpose agricultural (livestock) or horticultural structures
- Storage facilities, other than buildings, used to distribute petroleum or its primary products
- Off-the-shelf computer software
- Qualified Section 179 real property, if the taxpayer elects it: qualified improvement property, plus roofs, heating, ventilation and air-conditioning property, fire protection and alarm systems, and security systems added to nonresidential real property after it was first placed in service
What doesn't qualify
Section 179 property doesn't include property held for investment, property used mainly outside the United States, or property used by a tax-exempt organization, a governmental unit or a foreign person or entity, with limited exceptions.
Trade-ins are trimmed too. If property was acquired through a trade-in, only the cost above the value of the traded-in property can be included, not the carryover basis.
The deduction for energy efficient commercial buildings under section 179D is a different deduction. It isn't claimed on Form 4562. It goes on Form 7205.
Vehicles: the SUV cap and passenger car limits
For tax years beginning in 2025, the maximum Section 179 deduction for an SUV is $31,300. The cap covers any 4-wheeled vehicle mainly designed or used to carry passengers on public roads that is rated at more than 6,000 pounds and not more than 14,000 pounds gross vehicle weight.
The SUV cap doesn't apply to a vehicle designed to seat more than nine people behind the driver's seat, or one with a cargo area at least 6 feet long inside that isn't readily reachable from the passenger compartment. The IRS lists other exceptions as well.
Passenger automobiles rated 6,000 pounds or less are listed property with their own first-year cap. For one acquired after September 27, 2017, and placed in service in 2025, depreciation plus Section 179 is limited to $12,200, or $20,200 with the special depreciation allowance.
Listed property has to be used more than 50% in a qualified business use to qualify for Section 179. Its elected cost goes in Part V of Form 4562, not on line 6.
The business income limit and carryovers
The total Section 179 cost a taxpayer can deduct is limited to taxable income from the active conduct of a trade or business during the year. A passive investor doesn't count as actively conducting a business.
For individuals, that income is figured without the Section 179 deduction, the deduction for half of self-employment tax or any net operating loss deduction, and it includes wages, salaries and tips earned as an employee. Spouses filing jointly combine their taxable incomes.
For a partnership, the income limit excludes guaranteed payments to partners. For an S corporation, it excludes the deduction for compensation paid to shareholder-employees.
Any amount disallowed by the income limit carries over. Next year's Form 4562 picks it up on line 10 from line 13 of the prior year's form.
Section 179 and the special depreciation allowance
The order matters. Section 179 comes first, and the depreciable basis is reduced by the Section 179 deduction. The special depreciation allowance is an additional deduction taken after any Section 179 deduction and before regular MACRS depreciation.
P.L. 119-21, commonly known as the One Big Beautiful Bill Act, reinstated the 100% special depreciation allowance for certain qualified property acquired and placed in service after January 19, 2025. Certain qualified property acquired earlier and placed in service in 2025 is limited to 40%.
How to claim it on Form 4562
Form 4562 is required to claim a Section 179 deduction, including a carryover from a previous year. The election must be made on Form 4562 filed with either the original return for the year the property was placed in service, on time or not, or an amended return filed within the time allowed by law.
The election can be revoked without IRS approval by filing an amended return within that time. Once made, the revocation is irrevocable.
A taxpayer with several businesses files a separate Form 4562 for each, but completes only one Part I in full. That one is marked "Summary" and the allowed deduction is split among the businesses on line 12 of each separate form.
Scroll sideways to see all columns.
| Line | What goes there |
|---|---|
| Line 1 | Maximum amount ($2,500,000 for 2025) |
| Line 2 | Total cost of all Section 179 property placed in service, including listed property and a spouse's property |
| Line 3 | Threshold cost before the limit is reduced ($4,000,000 for 2025) |
| Line 5 | Dollar limitation for the year. If zero, no Section 179 election is possible |
| Line 6 | Description, business-use cost and elected cost of each property (not listed property) |
| Line 7 | Elected cost of listed property, from Part V |
| Line 10 | Carryover of disallowed deduction from the prior year |
| Line 11 | Business income limitation |
| Line 12 | Section 179 deduction for the year |
| Line 13 | Disallowed deduction carried to next year |
Recapture if business use drops
If Section 179 property stops being used more than 50% in the business at any time before the end of its recovery period, the benefit of the deduction must be reported as "other income" on the return.
For listed property used more than 50% for business in its first year and 50% or less in a later year, Form 4797 is used to figure the recapture amount.
Aldro's flat yearly price covers everything tax for the year, including the depreciation schedules that go with Schedule C, Form 1065, Form 1120-S and Form 1120. Our team prepares and files them.
Worked example
Say a calendar-year business places $4,100,000 of Section 179 property in service in 2025. The cost exceeds the $4,000,000 threshold by $100,000, so the $2,500,000 limit drops to $2,400,000. Now a smaller case: a sole proprietor buys a $60,000 machine in 2025 and uses it 100% for business, with $45,000 of business taxable income figured before the Section 179 deduction and no wages. The dollar limit isn't the problem, but the income limit is: the deduction for 2025 is $45,000, and the other $15,000 goes on line 13 and carries over to 2026. If that owner also earned $20,000 of wages as an employee, the income limit would be $65,000 and the full $60,000 could be deducted.
Common questions
What is the Section 179 limit?
For tax years beginning in 2025, $2,500,000, reduced by the amount the cost of Section 179 property placed in service exceeds $4,000,000. The 2026 figures weren't in the IRS instructions we checked.
What is the Section 179 limit for an SUV?
$31,300 for tax years beginning in 2025, for passenger vehicles rated over 6,000 and up to 14,000 pounds gross vehicle weight. Vehicles that seat more than nine behind the driver, or have a closed-off cargo area at least 6 feet long, are among the exceptions.
Can Section 179 be more than my business income?
No. The deduction is limited to taxable income from actively conducted businesses, which for individuals includes wages earned as an employee. The disallowed part carries over to the next year.
Do roofs and HVAC qualify for Section 179?
They can, if the taxpayer elects to treat qualified real property as Section 179 property. That covers qualified improvement property and roofs, HVAC, fire protection and alarm systems and security systems added to nonresidential real property after it was first placed in service.
Can I claim Section 179 on an amended return?
Yes. The election can be made on an amended return filed within the time allowed by law, and it can be revoked the same way without IRS approval. A revocation can't be undone.
What happens if business use falls to 50% or less?
The benefit of the deduction is reported as other income. For listed property, Form 4797 is used to figure the recapture.
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Sources
- IRS: Instructions for Form 4562 · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.