To maximize – or not to maximize – depreciation deductions on your 2025 tax return

Sec. 179 expensing allows small businesses to write off the full cost of 2025 eligible assets. For tax years beginning in 2025, the maximum Sec. 179 deduction is $2.5 million (double the pre-OBBBA limit). 

Eligible assets include:

• Depreciable personal property, such as equipment, computer hardware and peripherals, 
• Transportation equipment, including certain passenger vehicles, 
• Commercially available software, and
• Real estate QIP. 

For nonresidential real property, Sec. 179 deductions are also allowed for qualified expenditures for:

• Roofs, 
• HVAC equipment, 
• Fire protection and alarm systems, and 
• Security systems.

Finally, eligible assets include depreciable personal property used predominantly to furnish lodging, such as furniture and appliances in a property rented to transients.

In addition to the annual expense limit, Sec. 179 expensing is subject to a couple of other limits that don’t apply to bonus depreciation. First, the deduction is phased-out dollar for dollar if you put more than $4 million of qualifying assets into service last year. Second, Sec. 179 deductions can’t cause an overall business tax loss. The Sec. 179 deduction limits can be tricky if you own an interest in a pass-through business entity. 

That said, claiming Sec. 179 expensing can be beneficial for assets not eligible for 100% bonus depreciation or if you want to immediately deduct the cost of some, but not all, assets in a particular asset class that is also eligible for bonus depreciation.