Section 179 Deduction for Technology Purchases in 2025

Technology helps businesses run efficiently, but outdated or failing hardware can slow operations, create downtime, and increase costs. The U.S. tax code recognizes the importance of keeping business technology current through Section 179, which allows companies to deduct the cost of qualifying equipment purchased or financed during the year.

What is the Section 179 Deduction?

Section 179 lets businesses deduct the full purchase price of qualifying technology equipment in the year it is placed in service, rather than depreciating it over several years. This applies to equipment used for business purposes, including:

• Computers and laptops

• Business software with a non-exclusive license that has not been substantially modified

• Other office technology, such as printers, scanners, servers, and  networking hardware, such as routers, switches, and firewalls

• Business equipment that you purchase, finance or lease

Section 179 Limits for 2025

• Maximum Deduction: $1,250,000 for qualifying purchases

• Phase-Out Threshold: Deduction begins to phase out when total qualifying equipment purchases exceed $3,130,000, and it is fully phased out at $6,500,000

• Bonus Depreciation: 100% bonus depreciation is available for remaining costs of qualifying equipment after Section 179 deductions

All purchased or leased technology must be placed in service during the 2025 tax year to qualify.

Quick Reference: 2025 Section 179 Limits

Note: The Section 179 deduction phases out dollar‑for‑dollar when total qualifying purchases exceed $4,000,000 and is fully phased out at $6,500,000.

H.R.1 (effective for tax years beginning after December 31, 2024) doubled the Section 179 limit to $2,500,000, raised the phase‑out threshold to $4,000,000, and reinstated 100% bonus depreciation.

Key Considerations for IT Purchases

• Business Use Requirement: Equipment must be used more than 50% for business purposes. Deductions are proportional if business use is less than 100%.

• Income Limitation: The Section 179 deduction cannot exceed your business’s taxable income. Any excess can be carried forward to future years.

• New and Used Equipment: Both new and used qualifying technology equipment can be eligible for Section 179.

Resources for More Information

• Section179.org – Section 179 Deduction

• IRS Publication 946 – How to Depreciate Property

Not sure if you need an upgrade?

It depends on your usage, but Sourcepass recommends replacing computers as often as every three years as manufacturers release new architectures with improved performance. For other hardware, such as printers, servers, and switches, replacement is typically recommended every three to five years. If you notice a significant decline in performance or downtime is affecting your workflow, it may be time for new equipment.

After speaking to your CPA or accountant about the Section 179 tax deduction, reach out to your Strategic Advisor at Sourcepass at (877) 678-8080 so we can help recommend the best technology for your business needs.

Frequently Asked Questions (FAQ)

What types of IT equipment qualify for Section 179?
Qualifying IT equipment includes computers, laptops, servers, networking hardware (routers, switches, firewalls), printers, scanners, and certain business software.

What is the maximum Section 179 deduction for 2025?
The maximum deduction is $1,250,000, with a phase-out beginning at $3,130,000 in total qualifying purchases and fully phasing out at $6,500,000.

Can used technology equipment qualify for Section 179?
Yes. Both new and used technology purchases can qualify as long as they meet the business-use and placed-in-service requirements.

Is bonus depreciation available for technology purchases?
Yes. After applying Section 179, 100% bonus depreciation can be used on remaining costs for qualifying technology purchased in 2025.

Does equipment need to be in use by the end of the year?
Yes. To qualify, equipment must be placed in service and ready for business use during the 2025 tax year.

Can the deduction exceed my business income?
No. Section 179 deductions are limited to your taxable business income, but unused deductions can carry forward to future years.