Save Big and Score Tax Wins with New Equipment

Authored by: Greg Patel — Partner, CPA | Date Published: December 16, 2025

Every business owner knows the feeling: you need new equipment to grow, but the price tag makes you pause. But what if that necessary truck, manufacturing line, or new machinery could become your largest tax reduction this year? With new rules for 2025, your capital investment can be a timely opportunity for significant tax savings.

Recent tax law changes have created great opportunities for businesses making capital purchases in 2025. These updates significantly affect how much you can deduct and when you can take those deductions. Knowing these rules before your purchase can help you make smarter investment decisions and keep substantially more money in your business.

Let’s break down how these powerful deductions work and how you can implement them into your business.

What Is Section 179 and How Does It Benefit You?

Section 179 allows you to deduct the full purchase price of eligible Section 179 property in the year you buy and start using it. This approach to expensing equipment means you get the tax benefit immediately, rather than spreading the depreciation and tax deduction over several years.

Think of it this way: if you buy a $50,000 piece of machinery in December 2025, you can deduct that entire amount on your 2025 tax return, rather than deducting a portion each year over the equipment’s useful life.

For 2025, here are the key numbers:

Maximum deduction: $2.5 million
Deductions start to phase out once total purchases reach $4 million.
The deduction fully phases out at $6.5 million in equipment purchases.

The deduction covers both new and used equipment, giving you flexibility in how you invest. This matters because it means you don’t have to buy brand new to get the full benefit.

What Qualifies for Section 179?

Equipment and machinery used in your business
Office furniture and fixtures
Computers and software
Qualified vehicles used primarily for business (with specific limitations)

Structural building components (plumbing, wiring, HVAC) or land improvements (like pavement or fencing) typically do not qualify for Section 179, though other depreciation options may apply.

How Do Vehicle Purchases Work Under Section 179?

Vehicles have special rules that deserve attention, especially if you’re considering adding trucks or SUVs to your fleet.

Heavy vehicles (over 6,000 lbs. but under 14,000 lbs. gross vehicle weight):

Think about full-size pickup trucks and larger SUVs. These qualifying vehicles for Section 179 have a $31,300 deduction limit for 2025. Any remaining cost can be addressed through bonus depreciation.

Lighter vehicles (under 6,000 lbs.):

Sedans and smaller vehicles face much stricter limits, with first-year deductions capped at just a few thousand dollars. While 100% bonus depreciation does apply to these lighter vehicles, the total first-year deduction is restricted by statutory “luxury automobile” caps, currently limited to an estimated $20,200 for 2025.

The business-use requirement:

Your vehicle must be used more than 50% for business purposes to qualify, and the deduction is limited to the percentage of business use. Keep detailed mileage records to support your deduction. Maintain purchase contracts, vehicle-use logs, and relevant financial statements. This documentation will help substantiate your deductions if audited.

What Is Bonus Depreciation and How Does It Work with Section 179?

Bonus depreciation serves as a companion to Section 179. For 2025, this depreciation allowance lets you deduct 100% of qualifying property costs in the first year.

Here’s where it gets practical: let’s say you purchase a $90,000 SUV and use it 80% for business. After applying the Section 179 limit, bonus depreciation covers the remaining cost. Your total first-year deduction for the business portion would be $72,000. If you’re in a 24% federal tax bracket and face a 6% state tax rate, you could save approximately $21,600 in combined taxes.

Key differences between Section 179 and bonus depreciation:

Section 179: Has dollar limits, and you choose which assets to apply to.
Bonus depreciation: No dollar limit on total purchases, but it applies differently to various types of property.

Tax rules require that most businesses apply Section 179 first, followed by bonus depreciation. This combination can be particularly powerful for larger purchases.

Important timing consideration:

To qualify for 100% bonus depreciation, property must be acquired after January 19, 2025. For example, if you buy equipment on January 20, 2025, you qualify for the full 100% bonus depreciation. Equipment purchased earlier in 2025 may only qualify for lower rates. It’s important to plan your purchases accordingly to maximize this benefit.

When Do You See the Savings?

To see how these tax rules apply in practice, here are several real-world scenarios that break down the numbers and demonstrate the actual financial impact. These examples illustrate how the right tax planning can lead to significant savings for a variety of businesses:

Hotel renovation project: Imagine you run a hotel and decide to invest $180,000 in new furniture, bedding, and fixtures to update your property. Instead of waiting years to recover this cost through depreciation, Section 179 allows you to deduct the entire $180,000 in the year you make the purchase. If your combined federal and state tax rate is 30%, your tax bill could be reduced by $54,000. This means your renovation not only refreshes your property but also provides a substantial tax reduction this year.

Restaurant equipment upgrade: Suppose you own a restaurant and decide to spend $75,000 on new kitchen equipment and dining furniture. With Section 179, you can claim a deduction for the full purchase amount in the same year, rather than spreading it out over time. If your tax rate is 30%, you could save $22,500 in taxes that year, providing your business with immediate financial relief.

Construction company fleet addition: Let’s say you manage a construction company and purchase three heavy-duty trucks, with a total purchase price of $150,000. By using both Section 179 and bonus depreciation, you can deduct the entire business-use portion of this expense in the first year. If your tax rate is 30%, this could reduce your tax bill by $45,000, allowing you to reinvest those funds in your company sooner.

These savings directly increase your available funds, giving you more money to support operations, pay down debt, or invest in future growth, rather than sending that money to the government as taxes.

What Income Rules Apply?

Your Section 179 deduction cannot exceed your business’s annual income. This means if your business shows a loss or breaks even, you can’t use Section 179 to create or increase that loss.

However, the deduction doesn’t disappear. Any unused portion carries forward to future tax years when you have sufficient income to use it.

Planning consideration:

If your income is limited this year, you might choose to take a partial Section 179 deduction and save the remainder for future years when your income is higher.

What Critical Deadlines Do You Need to Meet?

Timing matters significantly for these deductions. To take advantage of Section 179 and bonus depreciation for 2025, you must both purchase the equipment and place it in service by December 31, 2025.

“Placed in service” means the equipment is ready and available for use in your business. Simply ordering equipment in December won’t qualify if it doesn’t arrive and get set up until January. For instance, if a piece of heavy machinery is delivered to your manufacturing plant on December 28, but your team cannot install it and calibrate it until January 5 of the next year, it is not considered ‘placed in service’ in 2025. It must be physically ready for its intended use by December 31.

Action items before year-end:

Identify equipment needs for your business growth.
Research qualifying purchases and vendors.
Coordinate with your CPA or tax advisor on timing.
Document business-use percentages for all assets.
Keep all purchase receipts and contracts.

How Should You Approach State Tax Considerations?

While federal rules provide substantial benefits, state rules vary. Some states automatically follow federal deduction rules, while others impose their own limitations or don’t recognize bonus depreciation. This can significantly impact your total tax savings. As a first step, check your state’s Department of Revenue website or consult your CPA to understand the specific rules that apply in your state.

Business owners operating in multiple states should consult their tax advisor to understand how these deductions will be treated at the state level.

What Are Your Next Steps?

These tax provisions offer real opportunities to reduce your 2025 tax liability while investing in your business’s future. The combination of higher Section 179 limits and full bonus depreciation creates favorable conditions for capital purchases. The clock is ticking toward the December 31 placed-in-service deadline. Don’t let this significant opportunity slip away due to delayed planning.

At MBE CPAs, we help business owners turn tax law changes into growth opportunities. We are here to analyze your specific situation, model your potential savings, and guide you through the documentation requirements. Your success matters to us, and we are committed to helping you make informed decisions that support both your immediate tax position and your long-term business goals.

Ready to discuss how these deductions apply to your planned equipment purchases? Contact us today to schedule a consultation. Let’s talk about turning your capital investments into immediate tax savings.

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