Jason Bane
Time is running out to make a decision that could save your company thousands of dollars.
Thanks to a new federal tax law signed on July 4, 2025, there’s a strong financial incentive to put new equipment into service before the year ends. Updates to IRS Section 179 deductions may allow you to write off 100% of the cost of qualifying new and used equipment on your 2025 taxes.
Don’t wait. These potential savings expire when the year does.
What Is Section 179?
Section 179 is a part of the U.S. tax code that allows businesses to deduct the full purchase price of certain types of equipment in the year it’s placed in service, rather than depreciating it slowly over time.
Under traditional rules, equipment must be depreciated over its useful life. But if your purchase qualifies for Section 179, you may be able to deduct the full amount up front, giving you a larger deduction in the year you invest.
What’s New for 2025?
The 2025 tax law made major changes to Section 179. Here’s what’s new:
- Deduction limit doubled to $2.5 million
- 100% bonus depreciation is back
- Applies to both new and used equipment
- Financed and leased equipment may qualify
- Equipment must be delivered and placed in service by December 31, 2025
There is a phase-out. The total deduction begins to decrease after $2.5 million in purchases and phases out completely at $4 million.
A Hypothetical Example Using Section 179 + Bonus Depreciation
Let’s say your company purchases $2.6 million in qualifying material handling equipment in 2025. Normally, you’d depreciate that over five years—about $520,000 per year.
But under the 2025 tax law, you may be able to deduct the entire amount in the first year by combining Section 179 with 100% bonus depreciation.
Here’s how it could break down:
- Total Equipment Purchase: $2.6 million
- Section 179 Deduction: $2.5 million (2025 limit)
- Bonus Depreciation: $100,000 (the portion above the limit)
- Total First-Year Deduction: $2.6 million
This assumes the equipment qualifies under IRS rules and is delivered, installed, and in service by December 31, 2025.
Important: This is a simplified example for illustration only. Use our Section 179 Calculator to estimate your potential savings. Always consult your tax adviser to confirm eligibility.
What If My Business Doesn’t Have Taxable Income?
Section 179 is a deduction, which means it only works if your business has taxable income to offset. If you’re operating at a loss or breaking even, you may not be able to use the deduction this year.
Bonus depreciation may still offer limited options depending on your situation. Be sure to talk to your CPA to determine what makes sense for your 2025 return.
What Equipment May Qualify?
To take advantage of Section 179, the equipment must:
- Be tangible personal property
- Be used more than 50% for business
- Have a useful life of more than one year
- Be delivered and placed in service by December 31, 2025
Most material handling equipment meets these requirements. Here are examples of equipment that may qualify:
- Forklifts and attachments
- Aerial lifts
- Batteries and charging stations*
- Pallet jacks and walkies
- Loading dock doors and equipment
- Racking, shelving, and mezzanines
- Safety equipment and barriers
- Scales and inspection stations
- Warehouse automation systems
- Utility vehicles
- Warehouse lighting and security systems
*Battery systems may qualify if they meet the criteria for tangible business property. In some cases, installation, labor, and related electrical components may also be deductible. Confirm with your tax adviser.
Can You Use Section 179 on Financed or Leased Equipment?
Some leases, yes. Many types of financed and leased equipment may qualify for the deduction. Consult your tax professional to confirm.
This means you could deduct the full cost in 2025 even if you haven’t paid it off yet. As long as the equipment meets IRS rules and is in use by the end of the year, the deduction may apply.
Does Used Equipment Qualify?
Yes. Used equipment may qualify for Section 179 too, as long as it’s new to your business and meets all eligibility requirements.
Used forklifts, pallet racking, attachments, and more can all potentially be deducted in the year of purchase.
Again, check with your CPA before finalizing any purchase.
A New Tax Break for U.S. Manufacturers: Section 168(n)
The 2025 law also introduced a new incentive for manufacturing businesses under Section 168(n), which applies to investments in Qualified Production Property (QPP).
This may allow businesses to deduct the full cost of building and equipping certain U.S.-based production facilities in the year the facility is placed in service.
To qualify:
- Construction must begin after January 19, 2025 and before January 1, 2029
- The facility must be completed and in use before January 1, 2031
What Is Qualified Production Property?
Under the law, a QPP is:
“Nonresidential real property used as an integral part of a qualified production activity, such as manufacturing, production, or refining of tangible personal property.”
In simpler terms, if your business manufactures or processes physical goods, and you’re expanding your facility, this incentive may apply.
Examples of potentially deductible improvements include:
- Automation and conveyor systems
- Lighting and safety upgrades
- Electric vehicle infrastructure
- Dock and door improvements
- Racking and layout reconfigurations
- Ventilation and air quality systems
This provision is new, and eligibility can be complex. Be sure to talk to your CPA if you’re planning a facility project.
Time Is Running Out:
Deadline is December 31, 2025
We’re already well into the year. If you want to take advantage of Section 179 for 2025, your equipment must be delivered, installed, and in service before midnight on December 31.
At Lilly, we’ve been helping businesses make smart equipment investments for more than 100 years. We’ll help you choose the right equipment for your application and provide the documentation your CPA needs to confirm eligibility.
We can’t offer tax advice, but we can work closely with your tax adviser to ensure the purchase and delivery timing supports your tax strategy.
Want to see how much your business might save? Try our free Section 179 Calculator to estimate your potential 2025 deduction.
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Disclaimer: This information is provided for general educational purposes only and should not be construed as tax, legal, or accounting advice. Please consult a qualified tax professional before making decisions.
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