What is Section 179?
Section 179 of the U.S. Internal Revenue Code lets businesses elect to deduct the cost of qualifying property in the year it is placed in service, instead of writing it off over many years through depreciation. The property must generally be used more than 50 % for business.
That means if your shop buys a CNC machine or lathe and begins using it before year-end, a large portion (or possibly the full cost) may be deductible that same year.
One Big Beautiful Bill Impacts
Section 179 has been part of the tax code for decades, originally designed to help small businesses invest in equipment without waiting years to recover costs through standard depreciation. Over time, Congress has made several adjustments to expand its impact—raising deduction limits, broadening the types of qualifying property, and refining how the phase-out works for larger purchases.
Here’s a summary of where Section 179 stands today and what’s changing:
- For tax year 2024, the maximum deduction was $1,220,000
- The deduction begins to phase out when total qualifying equipment purchases exceed $3,050,000
- In 2025, the deduction limit increases to $1,250,000
- The 2025 phase-out threshold will begin at $3,130,000
- Bonus depreciation, which had been gradually phasing down, will be fully restored at 100% for qualifying property placed in service after January 19, 2025
These changes are intended to give businesses more incentive to invest in capital equipment, especially when timed before year-end. For Reynolds customers, that can translate into real tax savings on CNC lathes, mills, and other eligible machinery.
How Section 179 Works
1. Qualifying property
Equipment, machinery, software, and certain improvements to nonresidential real property can qualify. The property must be used more than 50% for business.
2. Placed in service
You must place the equipment into service (meaning it is ready and available for use) in the same tax year you want to claim the deduction.
3. Deduction limits and phase-out
In 2025, the deduction limit increases to $1,250,000. The 2025 phase-out threshold will begin at $3,130,000
4. Income limitation and carryover
You can’t deduct more in Section 179 than your taxable income from business operations. If you have excess deduction beyond that, you may be able to carry it over to future years.
5. Bonus depreciation
If your equipment cost is beyond the Section 179 cap, you can often combine Section 179 with bonus depreciation. Usually, you apply Section 179 first, then bonus depreciation on the remaining cost. The 2025 law restores 100 % bonus depreciation for qualified property.
6. Recapture rules
If you stop using the property more than 50% in your business during its recovery period, part of the deduction may be recaptured and added back as income.
How It Might Apply to Reynolds Customers
For shops buying CNC lathes, mills, or other equipment, Section 179 could deliver real financial relief in the year of purchase. Here’s how it might work in a shop context:
Suppose your shop purchases a SMART vertical machining center for $300,000 in December and puts it into service immediately. Under Section 179, you could deduct that full $300,000 (assuming qualified use) from your taxable income in that year, giving immediate tax relief.
If your shop finances the purchase instead of paying cash, you may still take the Section 179 deduction as long as the machine is placed in service that year.
If your shop’s total qualifying equipment purchases remain under the phase-out threshold, you maximize benefit. If your purchases cross that line, your allowable deduction is reduced.
For a shop with multiple purchases, you may choose which items to deduct under Section 179 and which to depreciate or apply bonus depreciation.
Because Reynolds supports you locally, we can help structure your equipment purchase timing, ensure documentation is in order, and coordinate with your accountant to make sure you get the full intended benefit.
What to Watch Out For and Best Practices
Make sure your equipment is truly used for business, not personal, and that business use is over 50%.
Keep clear documentation: invoices, delivery dates, service logs.
Talk with your tax advisor before filing. We’re not tax professionals, but we can provide the equipment side detail that helps.
Timing is critical. If you miss placing the machine in service before year-end, you may lose the deduction for that year.
Be aware of phase-out thresholds. If your total purchases are very large, the benefit may decrease.
If you dispose of or stop using equipment, recapture rules may apply.
Want to know how Section 179 could benefit your shop?
If you’re planning to purchase a CNC machine, lathe, or other capital equipment this year, Section 179 could help you reduce your tax burden and improve cash flow.
Not sure how it applies to your situation? We’re here to help.
Contact Reynolds Machinery to discuss your upcoming equipment needs and how Section 179 might play a role in your purchase strategy.
