Section 179 Deduction History – Key Legislative Changes Over Time

Definition & Purpose

Section 179—codified at 26 U.S.C. §179—is an IRS provision that allows businesses to deduct the full purchase price of qualifying equipment and software in the year the asset is placed in service. Rather than depreciating these assets over several years, businesses can expense them upfront. Since its establishment in 1958, Section 179 has played a pivotal role in stimulating small business investment by easing cash-flow constraints and encouraging the acquisition of new assets.
Citation: 26 U.S.C. §179; Small Business Tax Revision Act of 1958

1958 – Establishment of Section 179

In 1958, the Small Business Tax Revision Act introduced Section 179. Initially, the law allowed small businesses to expense 20% of up to $10,000 of qualifying property—providing an immediate deduction (about $2,000 for single filers) rather than requiring gradual depreciation. This early provision was aimed at alleviating the financial burden on small businesses by promoting faster recovery of capital investments.
Citation: 26 U.S.C. §179; Small Business Tax Revision Act of 1958

1981 – Economic Recovery Tax Act (ERTA)

The ERTA marked the first major increase in Section 179 limits, raising the expensing cap to $5,000 for single filers (and $10,000 for joint filers) for the early 1980s. Although designed to enhance small business incentives, many companies still favored the investment tax credit (ITC) at that time.
Citation: ERTA, P.L. 97-34

1984 – Deficit Reduction Act

The Deficit Reduction Act postponed the final ERTA increase by delaying the planned jump to a $10,000 deduction for single filers from 1986 to 1990, reflecting a cautious fiscal approach.
Citation: Deficit Reduction Act, P.L. 98-369

1986 – Tax Reform Act of 1986

While the Tax Reform Act of 1986 did not directly alter Section 179, its repeal of the 10% investment tax credit shifted the focus toward Section 179 as a more attractive option for expensing capital investments.
Citation: Tax Reform Act of 1986, P.L. 99-514

1993 – Omnibus Budget Reconciliation Act (OBRA ’93)

OBRA ’93 increased the Section 179 maximum deduction from $10,000 to $17,500 for the 1993 tax year. In addition, the act introduced enhanced allowances for businesses in enterprise and empowerment zones, linking tax incentives with regional economic revitalization.
Citation: OBRA ’93, P.L. 103-66

1996 – Small Business Job Protection Act (SBJPA)

This act initiated a phased increase in the Section 179 limit—from $18,000 in 1997 up to $25,000 by 2003—reflecting a growing consensus on the importance of enhanced immediate expensing for small business growth.
Citation: SBJPA, P.L. 104-188

2000 – Community Renewal Tax Relief Act

The act expanded the scope of Section 179 by including “renewal communities” as eligible areas. Businesses located in these zones could claim an additional $35,000 in expensing, tying tax incentives directly to regional economic development initiatives.
Citation: Community Renewal Tax Relief Act, P.L. 106-554

2002 – Job Creation and Worker Assistance Act

In response to the economic fallout following 9/11, this act extended Section 179 benefits to businesses in the New York Liberty Zone and introduced a 30% bonus depreciation for qualifying assets. This marked the start of pairing bonus depreciation with Section 179 as a stimulus measure.
Citation: Job Creation and Worker Assistance Act, P.L. 107-147

2003 – Jobs and Growth Tax Relief Reconciliation Act (JGTRRA)

JGTRRA was a landmark stimulus measure that temporarily raised the Section 179 limit to $100,000 with a $400,000 phase-out threshold. It also increased bonus depreciation to 50%, thereby significantly boosting the incentive for businesses to invest in new equipment.
Citation: JGTRRA, P.L. 108-27

2004 – American Jobs Creation Act (AJCA)

The AJCA extended the enhanced Section 179 limits established under JGTRRA through 2007. This ensured the continuity of higher expensing allowances during a period of economic recovery.
Citation: AJCA, P.L. 108-357

2005 – Gulf Opportunity Zone Act

In the aftermath of Hurricane Katrina, this act provided businesses in the Gulf Coast with an extra $100,000 in expensing—in addition to the standard limit—and increased the phase-out threshold. This targeted relief was vital for disaster recovery.
Citation: Gulf Opportunity Zone Act, P.L. 109-135

2006 – Tax Increase Prevention and Reconciliation Act (TIPRA)

TIPRA extended the higher Section 179 limits and phase-out thresholds through 2009, preventing an abrupt reversion to lower levels and ensuring continued business investment incentives.
Citation: TIPRA, P.L. 109-222

2007 – U.S. Troop Readiness and Iraq Accountability Act

This legislation further raised the Section 179 cap to $125,000 with a $500,000 phase-out threshold (indexed for inflation) and extended special provisions for disaster-hit regions, including those impacted by Hurricane Katrina.
Citation: U.S. Troop Readiness and Iraq Accountability Act, P.L. 110-28

2008 – Economic Stimulus Act (ESA)

The ESA doubled the Section 179 limit to $250,000 and set an $800,000 phase-out threshold, while also reinstating 50% bonus depreciation. These measures were designed to stimulate capital investment at the onset of the Great Recession.
Citation: Economic Stimulus Act, P.L. 110-185

2009 – American Recovery and Reinvestment Act (ARRA)

ARRA maintained the heightened Section 179 expensing limits and bonus depreciation rates through 2009, ensuring that businesses continued to have strong incentives for investment during a period of economic crisis.
Citation: ARRA, P.L. 111-5

2010 – HIRE Act and Small Business Jobs Act

In 2010, legislative measures—including the HIRE Act and the Small Business Jobs Act—raised the Section 179 limit to $500, extended expensing to include certain real property improvements, and provided temporary 100% bonus depreciation for select assets. These steps were taken to accelerate business investment and support job creation.
Citation: HIRE Act, P.L. 111-147; Small Business Jobs Act, P.L. 111-240

2010 – Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act

Later in 2010, this Act adjusted the Section 179 deduction to $125,000 for 2012 and introduced 100% bonus depreciation for assets placed in service until the end of 2011. These provisions temporarily set the stage for reverting to lower limits in subsequent years unless further legislative action was taken.
Citation: Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act

2012 – American Taxpayer Relief Act (ATRA)

Enacted amid fiscal uncertainty, ATRA retroactively reinstated the $500,000 Section 179 limit for 2012 and extended it through 2013. This act averted a dramatic drop in expensing capability and continued the inclusion of off‑the‑shelf software and qualified real property under Section 179.
Citation: ATRA, P.L. 112-240

2014 – Tax Increase Prevention Act (TIPA)

TIPA was a one-year extender that maintained the $500,000 expensing limit (with a $2 million phase‑out threshold) for 2014, preserving the gains made during the recovery period.
Citation: TIPA, P.L. 113-295

2015 – Protecting Americans from Tax Hikes Act (PATH Act)

The PATH Act permanently established the enhanced Section 179 provisions by locking in a $500,000 limit and a $2 million phase‑out threshold (both indexed for inflation). It also permanently extended eligibility for off‑the‑shelf software and qualified real property improvements. Furthermore, the PATH Act extended bonus depreciation incentives for five years, eliminating the annual uncertainty of temporary provisions.
Citation: PATH Act, P.L. 114-113

2017 – Tax Cuts and Jobs Act (TCJA)

The TCJA significantly enhanced Section 179 by increasing the deduction limit to $1 million and raising the phase‑out threshold to $2.5 million. It also broadened the range of qualifying assets to include certain improvements on nonresidential real property (e.g., roofs, HVAC systems, and security systems). In addition, TCJA introduced 100% bonus depreciation for most qualifying assets acquired from late 2017 through 2022, including used equipment.
Citation: TCJA, P.L. 115-97; 26 U.S.C. §179

2020 – Coronavirus Aid, Relief, and Economic Security (CARES) Act

While the CARES Act did not directly change Section 179 limits, it addressed a technical issue arising from TCJA by reclassifying qualified improvement property (QIP) to a 15‑year recovery period. This correction restored QIP’s eligibility for bonus depreciation—ensuring that interior improvements to commercial buildings received the intended accelerated expensing benefit.
Citation: CARES Act, P.L. 116-136

Conclusion

From its modest inception in 1958 to its evolution into a multi-million-dollar incentive under modern tax law, Section 179 has consistently provided a critical boost to small business investment. By allowing businesses to expense qualifying asset purchases immediately—rather than depreciating them over several years—Section 179 has served as a vital engine of growth and innovation. Coupled with bonus depreciation provisions, this tax incentive remains a cornerstone of U.S. business tax policy, ensuring that companies can adapt, invest, and thrive in a competitive economic landscape.

References & Citations

• 26 U.S.C. §179 – Section 179 Expensing Provision
• Small Business Tax Revision Act of 1958
• Economic Recovery Tax Act (ERTA), P.L. 97-34
• Deficit Reduction Act, P.L. 98-369
• Tax Reform Act of 1986, P.L. 99-514
• Omnibus Budget Reconciliation Act (OBRA ’93), P.L. 103-66
• Small Business Job Protection Act (SBJPA), P.L. 104-188
• Community Renewal Tax Relief Act, P.L. 106-554
• Job Creation and Worker Assistance Act, P.L. 107-147
• Jobs and Growth Tax Relief Reconciliation Act (JGTRRA), P.L. 108-27
• American Jobs Creation Act (AJCA), P.L. 108-357
• Gulf Opportunity Zone Act, P.L. 109-135
• Tax Increase Prevention and Reconciliation Act (TIPRA), P.L. 109-222
• U.S. Troop Readiness and Iraq Accountability Act, P.L. 110-28
• Economic Stimulus Act (ESA), P.L. 110-185
• American Recovery and Reinvestment Act (ARRA), P.L. 111-5
• HIRE Act, P.L. 111-147
• Small Business Jobs Act, P.L. 111-240
• Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act
• American Taxpayer Relief Act (ATRA), P.L. 112-240
• Tax Increase Prevention Act (TIPA), P.L. 113-295
• Protecting Americans from Tax Hikes Act (PATH Act), P.L. 114-113
• Tax Cuts and Jobs Act (TCJA), P.L. 115-97
• Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136

Disclaimer  The information provided on this page is for educational and informational purposes only and should not be construed as tax advice. For personalized guidance regarding Section 179 and other tax matters, please consult a qualified tax professional.