Smart strategies for investing in equipment and reducing your tax bill
As a business owner, every dollar saved is a dollar you can reinvest in growth. If you’re considering new equipment or vehicle purchases in 2025, you have powerful tax tools at your disposal: the Section 179 deduction and Bonus Depreciation. These tax incentives are specifically designed to reward businesses that invest in themselves — and understanding how to use them can lead to major savings.
Here’s your 2025 guide to making the most of these tax benefits:
What is the Section 179 deduction?
Section 179 allows businesses to deduct the full purchase price of qualifying equipment — new or used — in the year it is placed into service, rather than depreciating the cost over several years. This deduction is ideal for small and mid-sized businesses aiming to lower their taxable income in the current year.
2025 Section 179 Limits and Rules
- Maximum Deduction: $2.5 million
- Spending Cap: $4 million on total equipment purchases
- Phase-out Threshold: The deduction begins to phase out dollar-for-dollar after $4 million in purchases and is completely phased out at $6.5 million.
- Eligible Property: Includes machinery, vehicles, off-the-shelf software, and other business-use equipment. Items must be used at least 50% for business.
- Deadline: Equipment must be purchased and placed in service by Dec. 31, 2025.
What Is Bonus Depreciation?
Bonus Depreciation lets businesses deduct a percentage of the cost of qualified assets in the first year. Unlike Section 179, this deduction is available to businesses of all sizes and does not have a cap on the amount spent.
2025 Bonus Depreciation Limits and Rules
- Depreciation Rate: Back permanently to 100% after new tax laws were passed earlier in 2025.
- Eligibility: Applies to new and used property with a recovery period of 20 years or less
- No Spending Cap: Bonus Depreciation can be applied beyond the Section 179 limit
- Flexibility: You can opt out of Bonus Depreciation on a per-asset-class basis
- Deadline: Equipment must be placed in service by Dec. 31, 2025
Combine Section 179 and Bonus Depreciation for maximum savings
The IRS allows you to use Section 179 first, followed by Bonus Depreciation on the remaining value. This dual strategy can significantly reduce your taxable income and free up capital to reinvest in your operations.
Tax planning tips for 2025
- Don’t miss the deadline: Only equipment in use by Dec. 31, 2025, qualifies. Be proactive in scheduling deliveries and installations to avoid delays.
- Consult a tax advisor: The nuances of Section 179 and Bonus Depreciation can be complex. A tax professional can help you determine the optimal strategy for your business based on asset types, business structure, and revenue.
Need financing? Let’s make it easy!
At United Leasing & Finance, we offer tailored equipment financing solutions to help you take full advantage of these tax incentives. Whether you’re upgrading equipment or expanding your fleet, we can help you finance it in a way that maximizes your savings and supports your long-term goals.
Contact us today to explore your options and start planning your most tax-efficient year yet.
About United Leasing & Finance
United Leasing & Finance is a customer-focused and growth-oriented leasing and finance company committed to providing custom financing solutions to businesses across the U.S. and Canada. For more than 60 years, United has partnered with clients to achieve mutual success from small businesses to Fortune 500 companies.
*The information contained here is for informational purposes only and not to provide tax, legal, or accounting advice. United Leasing & Finance assumes no obligation to inform readers of changes in tax laws or other changes that could affect the information here. You should always consult your tax professional before making any financial or tax decisions. The information here is not intended for and cannot be used for purposes of avoiding tax penalties that may be imposed on any taxpayer.
