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Section 179 Calculator — Immediate Expensing vs Depreciation

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Compare Section 179 immediate expensing of business equipment against 5-year MACRS depreciation — including the $1.22M cap and $3.05M phase-out (2026).

Section 179 lets you deduct equipment cost in year one instead of spreading over five years. NPV advantage is usually ten to fifteen percent.

How it works

Section 179 of the US Internal Revenue Code lets businesses immediately deduct the full cost of qualifying equipment in the year of purchase, rather than spreading deductions over the equipment's useful life via MACRS depreciation. 2026 cap: $1.22M (estimated). Equipment purchases above $3.05M reduce the cap dollar-for-dollar — at $4.27M of total purchases, no Section 179 is available.

The total nominal tax savings are the same under either approach (equipment cost × tax rate). What differs is timing. Section 179 gives the savings in year 1; MACRS spreads them over 6 years (with a half-year convention applied to year 1 and year 6). At any positive discount rate, Section 179 has a positive NPV advantage — typically 5-15% more wealth versus MACRS, depending on the equipment cost and discount rate.

Common mistakes

  • Forgetting the income limitation. Section 179 can't reduce taxable income below zero — excess deduction is carried forward to future years, not refunded. A business with $80k profit can't take $200k of Section 179 in one year.
  • Ignoring bonus depreciation interaction. Bonus depreciation (currently 60% in 2024, phasing down to 40%/20%/0% in 2025-26-27 absent extension) often applies alongside Section 179. Most CPAs sequence Section 179 first, then bonus on the remaining basis, then MACRS on whatever remains.
  • Treating Sec 179 as a tax credit. It's a deduction, not a credit — you save (deduction × marginal tax rate), not the full deduction. A $100k Section 179 deduction at 24% saves $24k, not $100k.
See the formula
Section 179 (2026 estimates):
  Limit:                    $1,220,000
  Phase-out threshold:      $3,050,000
  Phase-out:                $1-for-$1 above threshold
  Income limit:             Cannot create a tax loss (excess carries forward)

  Year-1 Tax Savings = MIN(cost, eligible 179) × Marginal Tax Rate

MACRS 5-Year (Half-Year Convention):
  Year 1: 20.00%      Year 4: 11.52%
  Year 2: 32.00%      Year 5: 11.52%
  Year 3: 19.20%      Year 6:  5.76%

NPV Comparison (5% discount rate):
  Section 179: full savings in year 1 → NPV ≈ savings ÷ 1.05
  MACRS:      sum of year_i savings ÷ 1.05^i across 6 years

Worked example

A landscaping company buys a $100,000 truck. Marginal tax rate (federal + state): 24%. Section 179 takes the entire $100,000 as a year-1 deduction → tax savings of $24,000 this year.

Under MACRS 5-year depreciation, the year-1 deduction is 20% × $100,000 = $20,000, saving $4,800 in tax. Year-2 savings: 32% × $100k × 24% = $7,680. Cumulative over 6 years: $24,000 total nominal — same as Section 179. But spread over time.

At a 5% discount rate, the NPV of Section 179 savings ($24,000 received in year 1) is ~$22,857. The NPV of the MACRS schedule (summing each year's savings discounted back) is ~$20,470. Section 179 wins by ~$2,387 of present value — a 12% advantage over the deferred MACRS option. Worth taking unless the business genuinely lacks the year-1 taxable income to absorb the full deduction.

When to use this calculator

Use this when planning a major equipment purchase — vehicles, machinery, computers, qualifying software, or office equipment — and you want to know whether immediate Section 179 expensing or the slower MACRS schedule produces more present-value tax benefit. It is also the right tool when modelling a year-end capex push to reduce a higher-than-expected tax bill.

If you are evaluating the underlying return on the investment rather than the tax timing, the ROI Calculator is the better starting point. To see whether the equipment purchase fits within available financing, pair this with the Business Loan Calculator.

Frequently Asked Questions

What is Section 179?
A US tax-code provision (IRC §179) allowing businesses to immediately deduct the full cost of qualifying equipment in the year of purchase, rather than depreciating it over the useful life. 2026 cap: $1.22M with phase-out starting at $3.05M of total purchases.
What equipment qualifies for Section 179?
Tangible personal property used in business — machinery, vehicles, office furniture, computers, software, and even some real-property improvements (roofs, HVAC, security systems on commercial buildings). Real estate land/buildings generally don't qualify. The asset must be acquired for business use AND placed in service in the tax year.
How is Section 179 different from MACRS depreciation?
Section 179 takes the full deduction in year 1. MACRS spreads the deduction over 3-39 years depending on asset class (5 years for most equipment). Total nominal tax savings are identical (cost × marginal rate); Section 179 has higher present value because the savings arrive sooner.
What's the phase-out rule?
If your total equipment purchases in the year exceed $3.05M (2026), the Section 179 cap reduces dollar-for-dollar. At $4.27M of purchases, the Section 179 cap is fully phased out and you're left with MACRS. The phase-out is designed to keep Section 179 focused on small and mid-size businesses.
Can Section 179 create a tax loss?
No. The deduction is limited to the business's taxable income for the year. Any excess Section 179 deduction is carried forward to future years (indefinitely) — but you can't use it to generate a refund.
How does bonus depreciation interact?
Bonus depreciation (currently 60% for 2024, dropping to 40%/20%/0% over 2025-2027 absent legislative extension) can be combined with Section 179. Most CPAs sequence: Section 179 first (up to limits), bonus depreciation on the remaining basis, then MACRS on whatever remains. The combination often eliminates the entire equipment cost from year-1 taxable income.
Should I always take Section 179?
Almost always yes when (a) you have sufficient taxable income to absorb the deduction, AND (b) you expect your future marginal tax rate to be lower or unchanged. The exception: if you expect a much higher tax rate in 2-3 years (e.g. business growth), spreading the deduction via MACRS might capture deductions at higher marginal rates.
Can I use Section 179 for vehicles?
Yes with caveats. SUVs and trucks over 6,000 lbs GVWR qualify for the full $30,500 (2026 estimate) — the so-called 'Hummer loophole'. Lighter vehicles are subject to a separate $20,200/year first-year cap. Specialty vehicles (delivery vans without rear seats, etc.) often qualify without the SUV cap.
When must I place equipment in service?
By December 31 of the tax year you want to claim the deduction. Buying equipment in December but not actually using it until January means the deduction shifts to the following tax year. For cash-method businesses, the 'placed in service' standard is sometimes more flexible than for accrual-method businesses.
What if I sell the equipment later?
If you sell within the asset's MACRS useful life, you recapture the depreciation as ordinary income (not capital gains). Section 179 recapture is calculated as the difference between actual depreciation taken and what straight-line depreciation would have been. This is rarely a problem because most equipment depreciates economically faster than the tax schedule.

Glossary

Section 179
The IRC provision allowing businesses to immediately deduct the full cost of qualifying equipment in the year of purchase, subject to annual dollar caps and an income limitation.
MACRS
Modified Accelerated Cost Recovery System — the default US depreciation method that spreads equipment cost over a fixed recovery period using accelerated schedules.
Bonus Depreciation
A separate accelerated-expensing provision that lets businesses deduct a percentage of qualifying property in year one. Currently phasing down annually unless extended.
Income Limitation
The rule preventing Section 179 from reducing taxable business income below zero. Unused deduction carries forward to future years rather than producing a refundable credit.

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Methodology & sources

Rates last verified: May 2026

Read the full methodology →

Compares Section 179 immediate expensing against straight MACRS 5-year half-year-convention depreciation. Doesn't model bonus depreciation interaction (currently phasing down 60%/40%/20%/0% across 2024-2027). Also assumes the business has sufficient taxable income to absorb the Section 179 deduction — excess is carried forward, not refunded.

Rates are reviewed annually or when a region changes its headline rate. If you spot one that's out of date, email [email protected].

For information only. This calculator does not constitute financial, accounting, or tax advice. Consult a qualified professional before making business decisions.

Try these scenarios

Pre-filled examples — click any chip to load the inputs and result.

How to compare Section 179 to MACRS depreciation

  1. Enter equipment costTotal purchase price of qualifying business equipment.
  2. Set your marginal tax rateFederal + state combined effective rate.
  3. Set discount rate for NPV5% is a reasonable default time-value-of-money assumption.
  4. Read the NPV advantageSection 179 normally wins by 10-15% of present value, unless you lack year-1 taxable income to absorb the full deduction.

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Written by

James Blanckenberg

Founder, BusCalcTools

Founder of BusCalcTools and FinnCalc. Builds practical financial calculators for small business owners and freelancers across the US, UK, and South Africa.

Editorial review by: James Blanckenberg, Founder & Editor

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