Qualifying Property for Section 179 Tax Deductions

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Updated: February 2025

Section 179 of the IRS Tax Code offers a powerful tax advantage for businesses by allowing the full purchase price of qualifying equipment or software to be deducted in the tax year it’s placed into service. By understanding precisely what qualifies for Section 179—and how to document it properly—you can help your business maximize this valuable deduction and keep more cash on hand for growth.

Essential Criteria for Qualifying Property

To benefit from Section 179, your purchased or financed property must meet all of the following requirements:

Business Usage Exceeding 50%

The property must be used more than 50% for business in the year you place it into service. If usage is partly personal, the deduction is reduced proportionally.

“New to You” Acquisition

Whether brand new or used, the asset must be new to your business. You cannot claim Section 179 on equipment or software you already owned or used in the past.

Placed in Service During the Same Tax Year

The property must be installed and ready for active business use within the same tax year you plan to claim the deduction.

Purchased or Financed (Not From Related Parties)

Section 179 requires that the equipment or software be acquired by purchase, financing, or a capital lease that qualifies under IRS guidelines.

> Prohibited Acquisitions: Property inherited, received as a gift, or bought from a related party (like family members or subsidiary companies) does not qualify.

By meeting these criteria, you ensure that your equipment or software is genuinely contributing to business operations, a key focus of the Section 179 incentive.

Business Usage Requirements

The “More Than 50% Business Use” Rule

The IRS mandates that property claimed under Section 179 be used predominantly (over 50%) for business. If you use an asset partly for personal reasons, your deduction is limited to the business-use percentage.

Example: If a computer is used 80% for business, only 80% of the property’s cost qualifies for a Section 179 deduction.

Record-Keeping Essentials

To substantiate your Section 179 claim, you must maintain detailed records, which may include:

  • Purchase invoices or financing agreements
  • Installation dates and the date you first place the item into service
  • Usage logs for assets with both business and personal use (e.g., mileage logs for vehicles)
  • Maintenance records that can help demonstrate consistent business use

Accurate documentation is your best defense if the IRS reviews your return.

Types of Qualifying Property

Section 179 applies to a broad range of business-related property. Below are the most common categories that typically qualify, so long as all other requirements are met.

Equipment & Machinery

  • Manufacturing equipment and production machinery
  • Construction, mining, or agricultural equipment
  • Industrial tools and specialized business machinery
  • Warehouse storage systems (e.g., racks, conveyors)

Tangible Personal Property

  • Office furniture (desks, chairs, filing systems, etc.)
  • Office equipment (printers, copiers, phone systems)
  • Professional-grade electronics (cameras, sound systems for commercial use)

Business Vehicles

  • Vehicles with a Gross Vehicle Weight Rating (GVWR) over 6,000 lbs (often SUVs, trucks, vans) can qualify under special rules
  • You must use the vehicle over 50% for business
  • Certain passenger vehicles may face additional limits

For details on vehicles and their unique deduction rules, please see:
Section 179 Vehicle Deductions

Computers & “Off-the-Shelf” Software

  • Desktop and laptop computers
  • Standard commercial software available to the general public (non-custom)
  • Peripheral devices (monitors, external drives) that are essential to business tasks

Certain Building Improvements (Non-Residential)

  • Fire suppression systems
  • Alarms and security systems
  • HVAC (heating, ventilation, air conditioning)
  • Roofing improvements
  • Interior property not considered a structural component

All such improvements must be integral to the operation or maintenance of your commercial property and placed in service during the current tax year.

Limitations and Thresholds

Annual Deduction Cap

Each year, Congress sets an annual Section 179 deduction limit. If your qualified purchases exceed this limit, you can often look to Bonus Depreciation for the remainder—subject to current tax rules.

Phase-Out Threshold

Section 179 is aimed at small and medium-sized businesses. As such, there is a phase-out that begins once your total eligible equipment purchases exceed a certain investment threshold. Every dollar above that threshold reduces your allowable deduction, dollar for dollar.

Listed Property Considerations

“Listed property” refers to items that may be used for both business and personal purposes (like laptops, cameras, smartphones).

  • These items require stringent record-keeping and strict business-use verification
  • If business usage slips below 50%, you lose Section 179 eligibility for that asset and must use standard depreciation methods instead

Best Practices for Section 179 Success

Plan Your Purchases Strategically

Time your equipment acquisitions to maximize the tax impact, especially as year-end approaches.

Track Business Use Meticulously

Keep mileage logs for vehicles and usage logs for dual-purpose equipment. If you ever face an audit, detailed records protect your deduction.

Stay Informed on Annual Limits

Section 179 limits and thresholds can change yearly. Check current IRS guidelines or consult with a tax professional.

Combine With Bonus Depreciation

If you exceed the Section 179 cap, consider Bonus Depreciation to further increase your immediate write-offs.

Consult a Professional

Every business scenario is unique. Work with a CPA or tax advisor to ensure full compliance and to strategize around your particular needs.

Key Takeaways

  • Over 50% Business Use: Critical to qualify for the deduction
  • New to You: Property can be new or used, as long as it’s newly acquired by your business
  • Placed in Service in the Same Year: Must be installed and operational before the tax year ends
  • Record-Keeping Is Paramount: Thorough documentation underpins any successful Section 179 claim
  • Watch for Limits: Annual deduction caps and phase-out rules can affect how much you can claim

7. Further Resources

Disclaimer: This page is intended for general informational purposes only and does not constitute tax or legal advice. Always consult an experienced tax professional or refer to official IRS publications for guidance specific to your situation.

By fully understanding what property qualifies for Section 179 and maintaining impeccable records, your business can capture substantial tax savings—freeing up capital to reinvest in growth.