When your business buys something that lasts more than a year — a truck, an excavator, a trailer — the tax code generally won't let you deduct the whole cost at once. Instead, you spread the deduction over the asset's useful life. That spreading is called depreciation.
But Congress created accelerators. And for contractors — who buy expensive equipment for a living — timing those accelerators is one of the biggest single-year tax moves available.
What is Section 179?
Section 179 lets you expense qualifying equipment immediately — deduct the full cost in the year you buy it and put it into service, instead of spreading it over five or seven years. The limits are generous enough that most contractors never come close to them.
Qualifying property is mostly what you'd expect: work trucks, heavy equipment, trailers, machinery, computers, and off-the-shelf software. The key requirements: the equipment must be purchased (or financed — financed counts) and placed in service during the tax year. Ordered in December but delivered in February? That's next year's deduction.
What are the real numbers?
Say you buy an $80,000 work truck in December and elect Section 179. Up to the full $80,000 can offset this year's income.
At a 30% combined tax rate, that's $24,000 of tax you don't pay in April. The truck effectively costs $56,000 in after-tax dollars.
Now imagine you bought the same truck in January of the following year without planning — same truck, same price, but the $24,000 of tax savings waits a full year. Timing didn't change what you bought. It changed what you kept.
What about bonus depreciation?
Bonus depreciation (Section 168(k)) is the second accelerator. Where Section 179 has some limits and elections to make, bonus depreciation has historically been simpler: take a large first-year percentage on qualifying equipment — and with 100% bonus depreciation back on the table, qualifying new *and used* equipment can often be fully deducted in year one.
The two work together, and the strategy question is always the same: deduct now, or deduct later? Usually now wins — a dollar of tax saved today beats a dollar saved in year five. But not always (see below).
Does used equipment qualify?
Yes — and this surprises a lot of owners. Both Section 179 and bonus depreciation apply to qualifying new and used equipment, as long as it's new to *you*. That $45,000 used excavator from the dealer lot can generate the same first-year deduction as a brand-new one.
This matters because contractors buy used constantly. Don't assume the tax benefit only comes with new iron. If it's placed in service this year and used more than 50% for the business, it's generally in play.
What about trucks you also drive personally?
Mixed-use vehicles get special attention. The vehicle generally needs to be used more than 50% for business to qualify, and only the business-use percentage is deductible. Keep a mileage log — contemporaneous, not reconstructed — showing business versus personal miles.
One thing working in contractors' favor: heavy work trucks and large SUVs (over 6,000 pounds gross vehicle weight) get more favorable treatment under Section 179 than standard passenger cars. Your F-250 is treated differently than a sedan — which makes sense, because it's a different tool. Check the current-year specifics with your tax pro, since the exact figures update annually.
When should you NOT accelerate the deduction?
This is the question most articles skip, and it's the one that separates planning from reflex:
- In a low-profit year, when your tax rate is already low, burning a big deduction wastes it. You might rather save the depreciation for a higher-income year.
- If you're close to a loss, an oversized deduction can create a net operating loss you didn't need — with its own carryforward rules to manage.
- If you're selling the business soon, aggressive depreciation can increase the taxable gain on sale (depreciation recapture). The deduction today can become tax tomorrow.
The rule: accelerate when your rate is high and the income is there to absorb it. Defer when it isn't. This is a decision, not a default.
What about state taxes?
One caution: not every state follows the federal rules. Some states decouple from bonus depreciation or limit Section 179, which means your federal and state deductions can differ. If you operate in multiple states — common for contractors near a border — this is worth checking before you count the savings.
What's the year-end move?
List every major asset your business bought this year, with dates and costs. Hand it to your tax pro before December and ask one question: *"Are we maximizing 179 and bonus depreciation on each of these?"*
And if you're considering a purchase: a truck bought and placed in service on December 31 counts for this year. A truck bought on January 1 counts for next year. One day can move tens of thousands of dollars of deductions across the line.
Your move
Pull together that asset list this week — don't wait for December, when every tax pro on earth is slammed. Equipment timing is a strategy you plan in October, not one you discover in April.
Want a second set of eyes on this year's purchases before the window closes? Book a discovery call here.
*This article is for education only and isn't tax advice for your specific situation — talk to a qualified tax professional before making equipment elections.*