Use Section 179 To Save on Technology Purchases
I bet it’s no surprise to you that at High Touch Technologies, we’re kind of technology geeks. For us, little can beat the speed, functionality, and productivity-boosting power of new equipment. Do you know what’s even better? The opportunity to buy new tech at a fraction of the cost.
As the year winds down, companies can strategically spend their remaining end-of-the-year dollars to take advantage of the Section 179 tax deduction. Through this tax deduction, eligible businesses can deduct the purchase price of qualified hardware and off-the-shelf software.
If you have leftover money in your budget that’s burning a hole in your pocket, or if you have substantial upgrade purchases coming your way next year, now is a smart time to plan and purchase equipment.
What Is Section 179?
We know that tax language isn’t the easiest to get through. The Section 179 tax deduction is an economic incentive offered by the U.S. government to encourage companies to invest in their business’s longevity by making qualified equipment purchases.
In conversational terms, the Section 179 tax deduction helps reduce your business’s cost of purchasing new hardware and off-the-shelf software. For 2025, businesses that purchase, finance, and/or lease (in some cases) new or used equipment can qualify for the Section 179 deduction. That means, if you buy, lease, or finance a piece of qualifying equipment, you can deduct the total purchase price from your annual gross income.
What Technology Products Qualify for the Section 179 Deduction?
- New Equipment. Workstations, servers, on-site backup devices, hard drives, phone system hardware, etc.
- Used Equipment. Any of the equipment above that has been refurbished or resold
- Off-the-Shelf Software. Software that’s available to the public that hasn’t been custom-engineered. You must use the software for income-producing activity and expect it to be in use for at least one year.
To qualify for the Section 179 deduction, the hardware and off-the-shelf hardware you purchase must be placed into service on or before December 31, 2025. In addition, these products must be used for business purposes at least 50% of the time. You must use qualifying software for income-producing activity and expect it to be in use for at least one year.
How Does Financing Equipment and Section 179 Work?
Applying the Section 179 deduction when you purchase equipment is straightforward — you buy equipment and follow the steps provided by the IRS to deduct the purchase price from your gross income.
As mentioned, in some cases, you can also lease or finance equipment in 2025 and still take advantage of the Section 179 tax deduction. This strategy can be particularly advantageous for budget-focused businesses that need to make essential hardware or off-the-shelf software upgrades.
Through the Section 179 deduction, businesses can deduct the full purchase price of financed equipment and/or software without paying the total purchase price upfront. In fact, the amount you deduct from your 2025 tax burden can exceed your payment amounts, which makes the Section 179 tax deduction a bottom-line-friendly decision.
Section 179 Deduction Limits and Spending Cap
- Deduction limit. $2,500,000
- Spending cap. $4,000,000
According to Section179.org, the spending cap is the maximum amount that can be spent on equipment before the Section 179 deduction available to your company begins to be reduced on a dollar-for-dollar basis. Larger businesses that spend greater than $6,500,000 on equipment are ineligible for the Section 179 deduction.
How Do Section 179 and Bonus Depreciation Work Together?
One of the biggest benefits for businesses in 2025 is the ability to combine Section 179 with bonus depreciation. Here’s how it works:
- Step 1 – Apply Section 179. You can deduct up to $2.5 million in qualifying technology purchases (hardware, software, and equipment) in the year they’re placed into service.
- Step 2 – Apply Bonus Depreciation. After you’ve hit the Section 179 limit, you can also deduct 100% of the remaining cost of qualifying assets using bonus depreciation.
In simple terms, that means most small and mid-sized businesses can write off the full cost of their technology investments in the first year. Whether you’re upgrading servers, refreshing employee workstations, or investing in cybersecurity hardware, you’ll likely be able to recover the entire expense on your 2025 tax return.
Example: If your company purchases $3 million in new equipment, you can deduct $2.5 million under Section 179 and then use 100% bonus depreciation to expense the remaining $500,000—all in 2025.
This one-two punch makes Section 179 and bonus depreciation a powerful tax-planning strategy for businesses that want to stretch their IT budgets further and invest in growth.
Contact Us
High Touch can help you determine the right technology solutions to help your business take full advantage of the Section 179 deduction before the end of the year. Contact us to learn more.
Disclaimer
This blog does not serve as tax advice. High Touch Technologies urges you to consult your tax professional before making a purchase.