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Investing in equipment can help your operation become safer, more productive and better prepared for growth. Depending on your business and the equipment you purchase, it may also provide a valuable tax deduction.
Section 179 and bonus depreciation are two federal tax provisions that may allow businesses to deduct some—or potentially all—of the cost of qualifying equipment in the year it is placed in service. For companies considering new or used forklifts, warehouse equipment, utility vehicles or other business assets, understanding these provisions can help inform year-end purchasing decisions.
Here is what business owners should know for the 2026 tax year.
What Is the Section 179 Deduction?
Ordinarily, the cost of business equipment is recovered through depreciation deductions spread across several years. Section 179 allows an eligible business to elect to deduct the cost of qualifying property in the year the property is placed in service, subject to applicable limits.
For tax years beginning in 2026, the maximum Section 179 deduction is $2,560,000. The deduction begins to phase out when the total cost of qualifying Section 179 property placed in service during the year exceeds $4,090,000.
Because the deduction phases out dollar for dollar above that threshold, it is generally eliminated once qualifying purchases reach $6,650,000.
These limits apply to the business’s total qualifying purchases—not to each individual piece of equipment.
What Equipment May Qualify?
Section 179 generally applies to qualifying tangible property purchased for use in the active conduct of a trade or business. Examples relevant to material-handling operations may include:
- New and used forklifts
- Reach trucks and order pickers
- Pallet jacks and aerial lifts
- Warehouse and material-handling equipment
- Certain utility and commercial vehicles
- Machinery and production equipment
Both new and used equipment may qualify, provided the applicable requirements are met. In general, the property must be acquired for business use, used more than 50% for qualified business purposes and placed in service during the tax year.
“Placed in service” means the equipment is ready and available for its intended business use. Simply signing a purchase agreement or ordering equipment before year-end may not be enough.
A Simple Section 179 Example
Suppose a business purchases a qualifying forklift for $100,000 and places it in service during 2026.
If the business is eligible to claim the full purchase price under Section 179, the potential result could look like this:
| Example | Amount |
|---|---|
| Equipment purchase price | $100,000 |
| Potential Section 179 deduction | $100,000 |
| Assumed federal tax rate | 21% |
| Illustrative federal tax savings | $21,000 |
| Illustrative after-tax equipment cost | $79,000 |
This is a simplified illustration. Actual savings will depend on the purchaser’s tax rate, taxable income, business structure, state tax treatment and other circumstances. A deduction reduces taxable income; it is not a dollar-for-dollar tax credit.
What Is Bonus Depreciation?
Bonus depreciation is another method of accelerating depreciation deductions for qualifying business property.
Current federal law generally provides 100% bonus depreciation for eligible property acquired and placed in service after January 19, 2025. Like Section 179, bonus depreciation can apply to qualifying new and used equipment, although used property must satisfy additional acquisition requirements.
Bonus depreciation may be especially helpful when:
- A business purchases more equipment than the Section 179 limit permits
- The Section 179 deduction is restricted by the business-income limitation
- A larger business exceeds the Section 179 investment threshold
- The business wants to accelerate eligible deductions across a broader pool of assets
Eligibility depends on the property, its recovery period, how it was acquired and other tax rules.
Section 179 vs. Bonus Depreciation
Although the two provisions can produce similar results, they operate differently.
| Section 179 | Bonus Depreciation |
| The business elects how much eligible cost to expense | Generally applies automatically unless the business elects out |
| Subject to an annual deduction limit | Not subject to the same annual dollar limit |
| Phases out when total qualifying purchases exceed the investment threshold | Does not have the same purchase-based phaseout |
| Generally limited by taxable income from active trades or businesses | May be available even when it creates or increases a net operating loss, subject to other rules |
| May offer more flexibility in selecting which assets to expense | Generally applies by property class unless an election is made |
Businesses may be able to use both provisions. Section 179 is generally applied first, followed by bonus depreciation on the remaining eligible basis. Regular depreciation may then apply to any basis that remains.
The best approach depends on the company’s current tax position, future expectations and overall equipment-investment strategy.
Does Financed Equipment Qualify?
Purchasing equipment with financing does not necessarily prevent the business from claiming a deduction based on the equipment’s eligible cost.
If qualifying equipment is financed and placed in service during the tax year, the business may be able to claim an eligible Section 179 or bonus-depreciation deduction even though payments continue into future years. This can allow a company to preserve working capital while potentially receiving a substantial first-year deduction.
The tax treatment of leases varies according to the structure of the agreement. Businesses considering leased equipment should ask their tax advisor to review the specific terms.
Do Not Wait Until the Last Day of the Year
To qualify for a 2026 deduction, eligible equipment generally must be placed in service by December 31, 2026 for a calendar-year taxpayer.
Availability, transportation, installation, operator training and any necessary site preparation can affect when equipment is ready for use. Beginning the purchasing process early provides more time to:
- Evaluate your operational needs.
- Identify qualifying new or used equipment.
- Arrange financing, if needed.
- Schedule delivery and installation.
- Place the equipment in service before the applicable deadline.
- Maintain purchase and business-use documentation.
- Review the transaction with a qualified tax professional.
Section 179 is elective and is generally claimed using IRS Form 4562 with the business’s tax return.
Turn a Necessary Investment Into a Potential Tax-Saving Opportunity
Tax benefits should not be the only reason to purchase equipment. However, if your business already needs to replace an aging forklift, expand its fleet or improve warehouse productivity, Section 179 and bonus depreciation could make the timing of that investment more favorable.
Fallsway Equipment Company can help you evaluate equipment options, availability and financing solutions for your operation. Contact our team to discuss the new or used equipment your business needs; and speak with your tax advisor about whether the purchase may qualify for accelerated deductions.
Ready to explore your equipment options? Contact Fallsway Equipment Company today.
*This article is provided for general informational purposes only and does not constitute tax, accounting, financial or legal advice. Tax laws and their application vary according to each taxpayer’s circumstances and may change. Fallsway Equipment Company does not determine whether an equipment purchase qualifies for a deduction. Consult a qualified tax professional before making purchasing or tax-planning decisions.