Section 179 limit jumps to $1.27M for 2026

The Section 179 deduction limit for tax year 2026 is $1.27 million, up from $1.25 million in 2025. The phase-out threshold — the point at which the deduction begins to reduce dollar-for-dollar — is $3.18 million in total equipment purchases. These figures were released by the IRS in October following the annual inflation adjustment.

For most small and mid-size fleet operators, neither limit is a practical constraint. A fleet buying three trucks at $95,000 each is at $285,000 in total equipment purchases — well below the phase-out threshold and well within the deduction limit. The entire purchase price can be written off in the year of purchase, subject to the business income limitation (the deduction cannot exceed your net income from active trades or businesses for the year).

What qualifies

Section 179 applies to tangible personal property used for business purposes. For fleet operators, that includes:

• Commercial trucks and trailers placed in service in 2026 and used for business more than 50% of the time
• Specialty equipment: liftgates, refrigeration units, safety equipment installed on existing vehicles
• Off-the-shelf software used for fleet management or dispatch

Real property improvements (facility renovations, building additions) generally do not qualify for Section 179, though some qualified improvement property may qualify for bonus depreciation separately.

Bonus depreciation in 2026

Bonus depreciation — a separate provision that allows additional first-year expensing — is at 20% for 2026 under the current phase-out schedule. This is down from 40% in 2025 and 60% in 2024 as the provision steps down toward expiration. Operators who can accelerate equipment purchases to 2026 before the phase-out continues should model whether the Section 179 deduction alone covers their purchase or whether bonus depreciation adds meaningful additional first-year write-off.

For a $95,000 truck purchase at a 25% effective tax rate, the tax savings from a full Section 179 deduction is $23,750 — an immediate reduction in the net cost of the equipment. At 20% bonus depreciation (applied to the remaining basis after Section 179), an additional deduction on top of that is possible if the purchase exceeds the Section 179 limit or if business income limitations restrict the Section 179 deduction for a given year.

Talk to your accountant before year-end if you are planning equipment purchases. The interaction of Section 179, bonus depreciation, and business income limits requires fact-specific analysis, and timing a purchase into 2026 versus 2027 may make a meaningful difference in which year you capture the benefit.