By Jodh Mehmi, Mehmi Financial Group
This article is general information as of 7 November 2026, not tax or legal advice. Proposed measures can change before they become law. Confirm how any rule applies to you with a qualified accountant or tax adviser.
Two federal rules let U.S. businesses deduct the cost of equipment much faster than ordinary depreciation: the Section 179 deduction and the additional first-year (bonus) depreciation deduction. Both matter if you are buying or financing trucks, machinery or other equipment.
Section 179 limits for 2026
According to IRS Publication 946, for tax years beginning in 2026 the maximum Section 179 expense deduction is $2,560,000. The limit is reduced by the amount by which the cost of Section 179 property placed in service during the year exceeds $4,090,000.
Bonus depreciation is now permanent at 100%
The IRS explains in its January 14, 2026 announcement of Notice 2026-11 that the One, Big, Beautiful Bill provides a permanent 100% additional first-year depreciation deduction for qualified property acquired after January 19, 2025. The notice also describes elections, including an election to deduct 40% (60% for certain longer-production property or certain aircraft) instead of 100% for property placed in service in the first tax year ending after January 19, 2025.
Section 179 vs bonus depreciation
| Section 179 | Bonus depreciation | |
|---|---|---|
| Annual dollar limit | $2,560,000 for 2026, phased out above $4,090,000 | No dollar cap |
| How it is claimed | Elected asset by asset | Applies automatically unless you elect out |
| Interaction | Your accountant can advise on the order and mix; Section 179 is generally limited by business income, while bonus depreciation is not subject to the same dollar limit. | |
Does financed equipment qualify?
Generally, what matters for these deductions is that you own the property and place it in service, not whether you paid cash. An equipment loan usually leaves ownership with you, so financed equipment can qualify. Many leases leave ownership with the lessor, in which case the lessor claims depreciation and you deduct lease payments instead. Some leases are treated as purchases for tax. Ask your accountant how your specific agreement is treated.
Interest on equipment loans
Interest on the loan is a separate question. It is generally deductible as business interest, subject to the section 163(j) limit for larger businesses explained in the IRS business interest Q&A.
Timing a purchase
- Deductions depend on when equipment is placed in service, not just when it is ordered.
- Delivery delays can push a deduction into the next tax year.
- Keep the invoice, delivery date and in-service date together for your accountant.
How Mehmi Financial Group can help
Mehmi Financial Group is a brokerage that compares equipment loans and leases from banks, equipment finance companies and alternative lenders in the USA and Canada. We do not give tax advice; each lender sets its own approval, rate and terms. See equipment financing options.
Frequently asked questions
What is the Section 179 limit for 2026?
IRS Publication 946 lists a maximum of $2,560,000 for tax years beginning in 2026, reduced once Section 179 property placed in service exceeds $4,090,000.
Is 100% bonus depreciation permanent?
Yes, for qualified property acquired after January 19, 2025, according to the IRS announcement of Notice 2026-11.
Can I take bonus depreciation on financed equipment?
Generally yes if you own the equipment and place it in service. Confirm with your accountant.
Can I use Section 179 on leased equipment?
It depends on whether the lease is treated as a purchase for tax. Many true leases are not.
Do these rules apply in Canada?
No. Canada uses capital cost allowance; see our Canadian CCA guides.
Is this tax advice?
No. It is general information as of 7 November 2026. Confirm with a qualified tax professional.