Normally when you buy a piece of equipment for your business, you depreciate it over several years. A $60,000 work truck might get deducted over five years, meaning you only write off a portion each year. Section 179 changes that. It lets you deduct the full purchase price in the year you put the equipment into service. That $60,000 truck becomes a $60,000 deduction this year instead of $12,000 a year for five years.

For 2024, the Section 179 deduction limit is $1,220,000. That ceiling is high enough that most small and mid-size contractors, plumbers, electricians, and landscapers will never come close to hitting it. The deduction starts phasing out once total equipment purchases exceed $3,050,000 in a single year.

The types of equipment that qualify are exactly what trades businesses buy regularly. Work trucks, vans, trailers, excavators, compressors, power tools, mowers, pressure washers, HVAC installation equipment, welding machines, and job site trailers all count. Office furniture, computers, and certain software qualify too. The equipment has to be purchased and put into use during the tax year you’re claiming it. Leased equipment can also qualify depending on the lease structure.

There’s an important rule around vehicles. Passenger vehicles under 6,000 pounds gross vehicle weight have a capped deduction, currently around $20,400 for the first year. But heavy trucks and vans over 6,000 pounds, which covers most full-size pickups, cargo vans, and work trucks that contractors drive, can often be deducted in full. This is one of the reasons your accountant might suggest a three-quarter ton truck over a half ton. The tax treatment can be significantly different.

The equipment must be used for business more than 50% of the time. If you buy a truck and use it 70% for work and 30% personally, you can only deduct the business-use portion. The IRS pays attention to this, especially with vehicles that go home with you at night. Keep a usage log if there’s any personal use involved.

One limitation that catches people off guard is the income requirement. Section 179 deductions cannot create or increase a net business loss. If your taxable business income before the deduction is $40,000, you can only take $40,000 in Section 179 deductions that year. The unused portion carries forward to future years, so it’s not lost, but it doesn’t help you this year.

Timing matters with Section 179. Buying a piece of equipment in December versus January can shift a large deduction into the current tax year or push it to the next one. This is where tax strategy becomes valuable. If you’re having a high-income year and you need that new skid steer anyway, buying it before year-end and taking the Section 179 deduction could save you thousands in taxes. But if income is tight this year and expected to grow next year, waiting might make more sense.

Bonus depreciation is a related but separate tool that works alongside Section 179. For 2024, bonus depreciation allows 60% first-year deduction on qualifying assets, down from 80% in 2023 and 100% in prior years. It continues to phase down each year. Some businesses use a combination of Section 179 and bonus depreciation to maximize their write-offs.

The biggest thing a Long Beach bookkeeper sees with trades businesses is equipment purchases that don’t get tracked properly. You buy a $15,000 trailer in June and the receipt goes in a drawer. By tax time nobody remembers if it was capitalized, expensed, or just sitting in a clearing account. Clean books throughout the year mean you actually capture these deductions when they’re available instead of discovering missed opportunities after you’ve already filed.