As a business owner, staying informed about the latest tax updates is important for planning your company’s financial strategies. Tax laws and codes can change often, which may present new opportunities or challenges. One such tax code is the Section 179 tax deduction, which the Internal Revenue Service (IRS) revised for 2025. If you plan to invest in new or updated business assets this year, you should become familiar with this year’s Section 179 updates.
This Balboa Capital blog article has the information you need about Section 179 for the current year. It begins by explaining what Section 179 is. Then, it outlines the 2025 deduction limit, bonus depreciation changes, business vehicle deduction limits, and more.
Overview of Section 179.
Section 179 is a tax code that enables businesses to deduct the full purchase price of eligible assets (equipment, machinery, vehicles, technology, etc.) during the tax year they are acquired instead of depreciating the cost over multiple years. Business owners might lower their company’s tax liability by taking an immediate tax deduction. In addition, they may reinvest those savings back into their operations and improve cash flow. Of course, acquiring new or updated assets might help improve a business’s efficiency and productivity and help it stay competitive.
Section 179 tax deduction limit for 2025.
For the tax year 2025, the Section 179 tax deduction limit is $1,250,000,1 reflecting a $30,000 increase over last year’s threshold. This revised deduction limit means businesses can write off a slightly bigger portion of their qualifying asset purchases. It is important to note that a business can combine more than one purchase in the same year. Let us use a commercial landscaping business as an example. If the owner of the landscaping business finances a transport truck and trailer, hydraulic wood chipper, and commercial lawn mower, all within 2025, the total cost of the three purchases combined will be the Section 179 deduction for 2025, so long as it doesn’t surpass the Section 179 deduction limit.
Bonus depreciation for 2025.
As mentioned, $1,250,000 of eligible assets can be expensed in 2025. This deduction amount will phase out dollar for dollar when the 2025 asset purchases surpass $3,130,000,2 known as the phase-out threshold. If a business purchases or finances qualifying assets in 2025 that exceed $3,130,000, bonus depreciation of 40% will apply.
2025 is the final year to receive a 40% bonus depreciation—it is scheduled to reduce to 20% in 2026. Many business owners elect the Section 179 tax deduction first and the bonus depreciation second. Every business’s situation is unique, so consult an accountant if you need assistance or recommendations.
Section 179 limit for vehicles in 2025.
Many types of vehicles used at least 50% of the time for business-related purposes qualify for Section 179. Light vehicles with a gross vehicle weight rating (GVWR) of less than 6,000 pounds have a maximum deduction of $12,200 in 2025.3 Sport utility vehicles (SUVs), commercial vans, and pickup trucks with a GVWR between 6,000 and 14,000 pounds have a maximum deduction of $31,300.4 While most light vehicles and SUVs have sticker prices of more than $12,200 and $31,300, respectively, the cost above these amounts might be eligible for bonus depreciation of 40% in 2025.
To explain this in simple terms, let us use a scenario where a business owner buys an SUV for $60,000 in 2025. The Section 179 deduction is $31,300, and the remaining cost is $28,700 ($60,000-$31,300). To calculate bonus depreciation, multiply $28,700 by 40%, which is $11,480. As mentioned in the blog section above, bonus depreciation is set to decrease to 20% next year, making now an opportune time to utilize this benefit.
Section 179 deduction for energy-efficient buildings.
Section 179D of the Internal Revenue Code is a tax deduction for energy-efficient buildings. It allows businesses to deduct the cost of specific improvements made to their commercial properties that enhance energy efficiency. These improvements include interior LED lighting retrofits and switching to energy-saving heating, ventilation, and air conditioning (HVAC) systems.
By claiming the Section 179D deduction, which is .58 cents per square foot in 2025,5 businesses may reduce their taxable income for eligible improvements made on or before midnight, 12/31/25. It is worth noting that the .58 cents per square foot deduction can increase to $1.16 per square foot6 depending on the annual energy and power reduction exceeding the 25% threshold.
Conclusion
The Section 179 tax deduction is straightforward, but not all types of business assets qualify for a write-off. You should consult an accountant for more information about Section 179, the eligible assets, and how the deduction may apply to your business. An accountant can make recommendations and help you file IRS Form 4562, which needs to accompany your company’s yearly tax return.
Sources:
1, 5, 6 https://www.irs.gov/pub/irs-drop/rp-24-40.pdf
2 https://www.nolo.com/legal-encyclopedia/50-bonus-depreciation-likely-extended-2014.html
3, 4 https://www.sdocpa.com/list-of-vehicles-over-6000-lbs-section-179/
Balboa Capital is not affiliated with nor endorses the Internal Revenue Service (IRS), Nolo, or SDO CPA. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.