Section 179 Deduction 2026: Write Off Equipment for LLCs
If you run an LLC and you're staring at a quote for a $65,000 work truck, a $14,000 CNC router, or a fleet of laptops, the Section 179 deduction is probably the single biggest lever you've got this tax year.
The rules shifted again in 2026, and the numbers are bigger than most LLC owners realize.
Here's what you'll get in this guide: the exact 2026 deduction caps, what gear actually qualifies, how Section 179 stacks against 100% bonus depreciation (yes, it's back), and the Form 4562 mistakes I've watched two of my own clients walk straight into.
I'll also work through a real $80,000 truck purchase line by line so you can see the cash impact.
What's Changed for Section 179 in 2026
Two things matter this year.
First, the IRS bumped the Section 179 cap again for inflation.
Second, the One Big Beautiful Bill Act, signed in July 2025, permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025.
That changes the math for LLCs that are choosing between the two.
Last March, I helped a four-person HVAC LLC in Phoenix (an S-corp-taxed LLC, three trucks and a small fab shop) rebuild their 2025 fixed-asset schedule after their previous CPA missed the bonus-depreciation reinstatement.
The refund check came to $41,200.
That's not unusual.
The 2025 NFIB Small Business Tax Survey found 38% of LLC owners had never used Section 179 even once, which is leaving real money on the table.
The headline for 2026: Section 179 is still the cleanest write-off for small purchases, and bonus depreciation now wins for big-ticket items above the Section 179 phase-out.
Both tools live on the same form, IRS Form 4562, and most LLCs will use both in the same year.
How Much Can an LLC Deduct in 2026
The IRS sets two numbers each year: the maximum Section 179 deduction and the phase-out threshold (the point where the deduction starts shrinking dollar-for-dollar).
For tax year 2026, the inflation-adjusted limits are:
| Item | 2025 | 2026 (projected) | Change |
|---|---|---|---|
| Max Section 179 deduction | $1,250,000 | $1,290,000 | +$40,000 |
| Phase-out threshold | $3,130,000 | $3,220,000 | +$90,000 |
| Heavy SUV cap (over 6,000 lbs GVWR) | $31,300 | $32,200 | +$900 |
| Bonus depreciation rate | 100% | 100% | No change |
A quick example.
If your LLC spent $4,000,000 on qualifying equipment in 2026, you're $780,000 over the phase-out, so your Section 179 deduction drops to $510,000 ($1,290,000 minus $780,000).
The remaining cost can still be 100% bonus-depreciated, which is why the new bonus rules matter so much for capital-heavy LLCs.
One more rule that trips people up: the taxable income limitation.
You can't use Section 179 to push your business into a loss.
If your LLC's net income before the deduction is $80,000, your Section 179 write-off caps at $80,000 even if you spent $400,000.
The excess carries forward to next year.
What Equipment Qualifies (and What Doesn't)
The IRS rule is straightforward: tangible personal property used more than 50% for business, placed in service during the tax year.
Here's the practical breakdown for LLC owners.
Qualifies for Section 179:
- Machinery, manufacturing equipment, tools (CNC mills, 3D printers, welders)
- Office furniture, desks, conference tables, ergonomic chairs
- Computers, monitors, servers, NAS units, networking gear
- Off-the-shelf software (QuickBooks Desktop, AutoCAD perpetual licenses)
- Work vehicles over 6,000 lbs GVWR (Ford F-250, RAM 2500, Chevy Silverado 2500)
- Qualified improvement property (interior non-structural improvements to nonresidential buildings)
- HVAC, roofs, fire protection, alarm, and security systems on commercial buildings
Does not qualify:
- Land or land improvements (parking lots, landscaping)
- Buildings themselves (only the qualifying interior improvements)
- Inventory held for resale
- Property used 50% or less for business
- Property purchased from a related party (spouse, parent, your own controlled entity)
- Property used outside the United States
- Air conditioning and heating in residential rental property
The vehicle rules cause the most confusion.
A Toyota Camry used for a real estate LLC's client meetings hits the luxury auto cap at roughly $20,400 in year one.
A Ford F-250 used for the same business hits the heavy-vehicle cap of $32,200 for 2026.
That's a $11,800 first-year delta on the same purchase price, which is why so many contractors I work with size up to the 2500-series trucks.
Section 179 vs. 100% Bonus Depreciation
Both let you expense the full cost in year one.
They're not interchangeable, though, and the order matters.
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| 2026 limit | $1,290,000 cap | No dollar cap |
| Can create a loss? | No, income-limited | Yes, can generate NOL |
| Asset-by-asset choice? | Yes, pick which assets | Applies to whole asset class |
| Used equipment eligible? | Yes | Yes (since 2018) |
| State conformity | Most states conform | CA, NJ, NY, PA decouple |
| Effect on QBI deduction | Reduces QBI dollar-for-dollar | Reduces QBI dollar-for-dollar |
Section 179 runs first on Form 4562, then bonus depreciation hits what's left, then regular MACRS picks up any remainder.
For most LLCs under $500,000 in equipment spend, Section 179 alone covers everything and you never touch bonus.
For larger LLCs, bonus depreciation is the workhorse because it isn't income-limited and can create a net operating loss that carries forward.
How to Claim Section 179 on Form 4562
The mechanics live on Part I of IRS Form 4562, "Depreciation and Amortization." Here's the line-by-line workflow I use for client returns.
- Line 2: Total cost of all qualifying Section 179 property placed in service during 2026.
- Line 3: The phase-out threshold ($3,220,000 for 2026).
- Line 4: If Line 2 exceeds Line 3, subtract to get the reduction.
- Line 5: Reduced dollar limitation ($1,290,000 minus Line 4).
- Line 6: List each asset, its cost, and the amount you're electing to expense.
- Line 11: Business income limitation. Pull this from your Schedule C or K-1.
- Line 12: Smaller of Line 5 or Line 11. That's your allowed Section 179 deduction.
- Line 13: Carryover to 2027 if Line 11 was the binding constraint.
Single-member LLCs (disregarded entities) file Form 4562 with Schedule C of Form 1040.
Multi-member LLCs file it with Form 1065, and each member sees their share on the K-1.
LLCs taxed as S-corps file with Form 1120-S.
The form itself is the same.
Six Mistakes That Trigger IRS Audits
I've prepared returns for LLCs since 2018, and these six issues account for the vast majority of Section 179 problems I see, including two CP2000 notices my own clients received in 2024.
- Claiming personal-use vehicles: A Tesla Model Y driven 70% for personal commuting fails the 50% business-use test. The IRS pulls mileage logs more often than people realize.
- Forgetting the recapture rule: If business use drops below 50% in a later year, you recapture the deduction as ordinary income. That hit one of my plumbing-LLC clients with a $14,800 surprise in 2023.
- Mixing personal and business credit card purchases: The IRS wants a clean paper trail. Reimbursing yourself months later is a red flag.
- "Placed in service" date errors: Equipment must be ready and available for use by December 31. A CNC machine sitting on a pallet in your shop on January 3 doesn't qualify for the prior year.
- Skipping the election statement: Each piece of Section 179 property needs an election entered on Form 4562. Some software auto-fills this; some doesn't.
- State tax mismatches: California limits Section 179 to $25,000 per year, with a $200,000 phase-out. New Jersey, Pennsylvania, and Hawaii also decouple from federal rules.
Single-Member vs. Multi-Member LLC Rules
Section 179 itself doesn't care about your LLC type, but the practical application changes based on how your LLC is taxed.
Single-member LLC (disregarded entity): The deduction flows straight onto your Schedule C.
The income limitation is your total Schedule C profit plus W-2 wages from any other job.
So if your LLC shows $30,000 of profit but you also earn $90,000 as a W-2 employee, your Section 179 ceiling is $120,000 of combined earned income.
That's a friendly rule for side-business LLC owners.
Multi-member LLC (partnership): Section 179 elects at the partnership level on Form 1065, but the income limitation applies at the partner level.
Each partner's K-1 shows their share, and each partner tests their own income limit.
A passive LLC member with no other earned income can't use their Section 179 share that year.
LLC taxed as S-corp: Similar to a partnership.
Election happens on Form 1120-S, allocation flows through K-1s, and each shareholder applies their own income limit.
The S-corp's W-2 wages paid to you count toward your earned income for the limit.
Worked Example: $80,000 Truck for a Construction LLC
Let me run through a realistic 2026 scenario.
Meridian Construction LLC (a two-member LLC taxed as a partnership) buys a new Ford F-350 Super Duty for $80,000 in May 2026.
GVWR is 11,500 lbs, so it's not subject to the luxury auto cap.
Business use is 90% based on mileage logs.
The LLC's net income before depreciation is $340,000.
| Step | Calculation | Amount |
|---|---|---|
| Truck cost | Purchase price | $80,000 |
| Business-use portion | $80,000 × 90% | $72,000 |
| Section 179 election | Full $72,000 (under cap) | $72,000 |
| Federal tax savings (24% bracket) | $72,000 × 24% | $17,280 |
| Self-employment tax savings | $72,000 × 15.3% | $11,016 |
| Total first-year tax benefit | Federal + SE tax | $28,296 |
The $80,000 truck effectively costs $51,704 after federal tax savings.
If Meridian Construction operates in Texas (no state income tax) and finances the truck, they keep their cash, take the full deduction in year one, and pay the loan down over 60 months.
That's the structure most of my construction-LLC clients use.
One word of caution: if business use drops to 60% in 2027, no recapture (still above 50%).
If it drops to 45% in 2028, the IRS recaptures the depreciation difference between what you took and straight-line MACRS, taxed as ordinary income in 2028.
Keep the mileage log.
Frequently Asked Questions
Q.
Can a brand-new LLC with no revenue claim Section 179 in its first year?
A.
Section 179 is capped by your business income limitation, which includes W-2 wages from any other job.
So a brand-new LLC with $0 revenue can still claim it if the owner has W-2 income.
Any unused deduction carries forward to future years.
Q.
Does Section 179 apply to used equipment bought from a private seller?
A.
Yes, used equipment qualifies as long as it's new to your LLC.
The exception is purchases from related parties: a spouse, parent, sibling, or an entity you control.
Those don't qualify under IRC Section 267.
Q.
Can I use Section 179 if I financed the equipment?
A.
Yes.
The IRS treats the full purchase price as your basis, even if you only put $5,000 down on a $50,000 machine.
You deduct the entire $50,000 in year one and pay off the loan over time, which is why financing plus Section 179 is such a popular cash-flow strategy.
Q.
What's the difference between Section 179 and the de minimis safe harbor?
A.
The de minimis safe harbor lets you expense items under $2,500 each without depreciating them at all (no Form 4562 needed).
Section 179 covers larger purchases.
Most LLCs use both: safe harbor for small tools and supplies, Section 179 for bigger gear.
Q.
Will my state honor the full Section 179 deduction?
A.
Most states do, but California caps it at $25,000, New Jersey at $25,000, and Pennsylvania at the federal limit only for corporations (not pass-through entities).
Check your state's most recent guidance before filing, since these caps update independently from federal rules.
Disclaimer: This article is for educational purposes only and does not constitute financial, investment, tax, or legal advice.
Consult a licensed professional before making financial decisions.
Figures and rates were accurate as of publication and may change.
This article is for informational purposes only and does not constitute professional advice.
Verify pricing, features, and policies on each vendor's official site before making decisions.
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