Texas Equipment Finance | Nationwide Equipment Financing for Growing Businesses

One of the most significant advantages of equipment financing is the potential tax benefits. Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment in the year it's placed in service. Understanding how to leverage this deduction can save your business thousands of dollars.

What is Section 179?

Section 179 is a tax provision that allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. Instead of depreciating the asset over several years, you can take the entire deduction in year one.

2025 Section 179 Limits

For the 2025 tax year:

**Maximum Deduction:** $1,220,000

**Spending Cap:** $3,050,000 (deduction begins to phase out above this amount)

**Bonus Depreciation:** 80% for 2025 (for amounts exceeding Section 179 limits)

What Equipment Qualifies?

Most tangible business equipment qualifies for Section 179, including:

Construction equipment (excavators, loaders, bulldozers)

Vehicles (trucks, vans, trailers)

Manufacturing equipment

Office equipment and furniture

Computers and software

Warehouse equipment (forklifts, racking systems)

The equipment must be used for business purposes more than 50% of the time to qualify.

How Section 179 Works with Financing

Here's the powerful part: you can take the full Section 179 deduction even if you finance the equipment. This means you can:

Finance equipment with little or no money down

Deduct the full purchase price in year one

Use the tax savings to offset your financing payments

Example:

You finance a $100,000 excavator with $0 down. Your monthly payment is approximately $2,000. If you're in the 25% tax bracket, the Section 179 deduction saves you $25,000 in taxes. That's more than a year's worth of payments covered by tax savings!

Timing Matters

To claim Section 179, the equipment must be purchased AND placed in service during the tax year. "Placed in service" means the equipment is ready and available for use in your business.

Year-End Planning:

Many businesses make equipment purchases in Q4 to maximize tax benefits. If you're considering equipment financing, don't wait until December – start the process early to ensure equipment is delivered and operational before year-end.

Section 179 vs. Bonus Depreciation

While Section 179 has spending limits, bonus depreciation allows you to deduct a percentage of equipment costs with no cap. In 2025, bonus depreciation is 80%. These deductions can be combined:

First, apply Section 179 up to the limit

Then, apply bonus depreciation to remaining costs

Finally, depreciate any remaining amount over time

Important Considerations

Consult a Tax Professional: Tax laws are complex and change frequently. Always work with a qualified accountant or tax advisor to maximize your benefits.

Business Income Limitation: Section 179 deductions cannot exceed your business's taxable income. However, unused deductions can be carried forward to future years.

State Variations: Some states don't conform to federal Section 179 rules. Check your state's tax laws for specific guidance.

Maximizing Your Tax Benefits

Plan Purchases Strategically: Time equipment purchases to maximize deductions in years when you have higher taxable income.

Keep Good Records: Maintain documentation of equipment purchases, financing agreements, and when equipment was placed in service.

Consider Financing: Even if you have cash available, financing equipment allows you to preserve capital while still taking the full deduction.

The Bottom Line

Section 179 makes equipment financing even more attractive by allowing you to deduct the full purchase price while spreading payments over time. At Texas Equipment Finance, we help businesses understand and leverage these tax benefits as part of their overall equipment strategy.