26 U.S. Code § 179 (Rev. Proc. 2025-32 & P.L. 115-97 TCJA)United States (Federal)Verified for Tax Year 2026Last verified 2026-09-15

2026 IRS Section 179 Expensing Threshold & Phaseout Benchmark

Authoritative 2026 statutory benchmark for IRS Section 179 capital equipment expensing. For tax year 2026, the maximum allowable first-year expense deduction is $1,250,000, with a dollar-for-dollar phaseout investment ceiling beginning at $3,130,000 and terminating completely at $4,380,000 in qualifying asset purchases. This benchmark models interaction with TCJA Section 168(k) bonus depreciation (20% sunset tier) and standard MACRS cost recovery across corporate revenue tiers.

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Key Statutory Takeaways & Compliance Thresholds

2026 Maximum Deduction: $1,250,000 under indexed inflation adjustments pursuant to 26 U.S. Code § 179(b)(6).
Phaseout Threshold: $3,130,000 qualifying acquisition ceiling; every dollar above $3,130,000 reduces deduction dollar-for-dollar until $4,380,000 complete phaseout.
TCJA Bonus Depreciation Sunset: Section 168(k) bonus depreciation stands at 20% in 2026 (prior to sunset), absorbing remaining eligible basis post-Section 179.
Net Taxable Income Cap: Section 179 deductions cannot exceed aggregate active business taxable income; excess deductions carry forward indefinitely under § 179(b)(3)(B).
State Non-Conformity Risk: Major states (CA, NY, NJ, PA) decouple from federal Section 179 limits, capping expensing at $25,000 to $100,000.

Statutory Formula & Mathematical Derivation

Statutory limits are derived from IRS Revenue Procedure inflation indexing formulas under 26 U.S.C. § 179(b). First-year depreciation schedules combine Section 179 dollar-for-dollar phaseout math, secondary 20% Section 168(k) bonus depreciation on remaining unexpensed basis, and half-year convention 5-year MACRS recovery on the residual book basis. Corporate tax shields assume the standard 21% federal corporate income tax rate.

Mathematical Notation:\text{Allowable Deduction} = \max\left(0, \min(C, D_{\max}) - \max(0, C - T_{\text{phaseout}})\right), \quad D_{\max} = \$1,250,000, \; T_{\text{phaseout}} = \$3,130,000

Statutory Benchmark Matrix (2026)

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Asset Investment Tier	Total Qualifying Placed in Service	Section 179 Immediate Expensing	TCJA Bonus Depreciation (20%)	Year 1 MACRS Basis Recovery	Total First-Year Write-Off	First-Year Tax Shield (21% C-Corp)
Tier 1: Small Equipment	$500,000	$500,000	$0	$0	$500,000	$105,000
Tier 2: Deduction Cap	$1,250,000	$1,250,000	$0	$0	$1,250,000	$262,500
Tier 3: Mid-Tier Expansion	$2,500,000	$1,250,000	$250,000	$200,000	$1,700,000	$357,000
Tier 4: Phaseout Inception	$3,130,000	$1,250,000	$376,000	$300,800	$1,926,800	$404,628
Tier 5: Partial Phaseout	$3,750,000	$630,000	$624,000	$499,200	$1,753,200	$368,172
Tier 6: Complete Phaseout Cliff	$4,380,000	$0	$876,000	$700,800	$1,576,800	$331,128
Tier 7: Enterprise Heavy Capex	$6,000,000	$0	$1,200,000	$960,000	$2,160,000	$453,600

Source: 26 U.S. Code § 179 (Rev. Proc. 2025-32 & P.L. 115-97 TCJA)All values verified for tax year 2026

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[RoutineMetric Benchmark: US Section 179 Expensing Matrix (2026) | Authority: 26 U.S. Code § 179 (Rev. Proc. 2025-32 & P.L. 115-97 TCJA) | Jurisdiction: United States (Federal) | Year: 2026 | Canonical URL: https://routinemetric.com/benchmarks/us-section-179-depreciation-2026]

License: Creative Commons Attribution 4.0 International (CC-BY 4.0)Verified Authority: 26 U.S. Code § 179 (Rev. Proc. 2025-32 & P.L. 115-97 TCJA)

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Statutory Authority Questions & Answers

What is the maximum Section 179 expense deduction for tax year 2026?

For 2026, the maximum Section 179 expensing limit is $1,250,000. Eligible property includes new and used tangible personal property, off-the-shelf computer software, and qualified improvement property (QIP) placed in service during the 2026 calendar tax year.

How does the Section 179 phaseout threshold operate in 2026?

The phaseout begins once a business places more than $3,130,000 of qualifying Section 179 property in service during 2026. For every dollar spent above $3,130,000, the allowable deduction is reduced by exactly one dollar. Once total acquisitions reach $4,380,000 ($3,130,000 + $1,250,000), the Section 179 deduction is completely eliminated.

Can Section 179 create a net operating loss (NOL)?

No. Under 26 U.S. Code § 179(b)(3), the deduction is limited to aggregate active taxable trade or business income. However, any disallowed deduction caused by the taxable income limitation can be carried forward indefinitely to subsequent tax years.

What is the bonus depreciation rate for 2026 under TCJA?

Under the Tax Cuts and Jobs Act (TCJA) phase-down schedule, Section 168(k) bonus depreciation is 20% for property placed in service during calendar year 2026, dropping to 0% for tax years beginning after December 31, 2026 unless extended by federal legislation.