Leveraging Section 179 After OBBB

The One Big Beautiful Bill Act, signed on July 4, 2025, roughly doubled the amount a business can expense under Section 179. The change is real and it is permanent. It is also narrower than most of the headlines suggest, so I want to set out what the provision does and where it fits in a large tax year.

What the law changed

Before the Act, the Section 179 limit for 2025 was $1,250,000 and the deduction began to phase out once a business placed more than $3,130,000 of qualifying property in service. The Act raised those figures to $2,500,000 and $4,000,000 for tax years beginning after December 31, 2024, and it indexed both for inflation.

For 2026 the limit is $2,560,000 and the phase-out threshold is $4,090,000, as published in Revenue Procedure 2025-32. Above the threshold the limit shrinks dollar for dollar, and it reaches zero at $6,650,000 of qualifying property.

The same Act restored 100 percent bonus depreciation for property acquired after January 19, 2025, and made it permanent. That matters here because bonus depreciation has no dollar cap, and for many owners it does the same work.

What qualifies

Section 179 applies to tangible property bought for use in an active trade or business. Equipment and vehicles are the usual examples, along with off-the-shelf software. It also reaches certain improvements to nonresidential buildings, including roofs, HVAC, fire protection, alarm and security systems.

It does not apply to land or to the building itself. Heavy sport utility vehicles carry their own cap, which is $32,000 for 2026.

Two limits that matter more than the dollar cap

The first is income. The deduction cannot exceed your taxable income from active trades or businesses for the year. Anything above that carries forward to a later year. It does not create a loss.

The second is timing. The property has to be placed in service during the tax year, which means delivered and ready for use. Equipment ordered in December and delivered in January belongs to the next year.

Where it fits in a sale or a high-income year

Section 179 is a deduction against business income. On its own it does not reduce the capital gain on the sale of a business or a building. An owner with a large ordinary income year and a genuine need for equipment can turn part of that year's tax into productive assets. That is the result Congress intended when it wrote the incentive.

An owner who buys equipment he does not need has spent a dollar to save less than forty cents. The incentive rewards investment you would make anyway. It does not reward spending for its own sake.

There is also a cost on the way out. When Section 179 property is later sold, the deduction is recaptured as ordinary income. A seller who expensed heavily in earlier years will meet that charge at closing. It is one of the four taxes that stack on one closing.

How we treat it

In our analysis, Section 179 is one provision among many, and we measure it against the whole year. Sometimes it is the right tool. More often it is a supporting piece beside provisions that address the gain itself. If your year includes unusual income, the calendar matters more than the cap, and I have written about that in The Fourth Quarter Window on a High-Income Year.

This information is general and is not tax, legal, or investment advice. Every situation is different. Work with your own CPA and attorney before acting on any strategy.