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2025 Tax Tip #3: Maximize Savings with the Section 179 Deduction

Writer's picture: The Redhead SolutionsThe Redhead Solutions

Small businesses have an opportunity to save big this year with the updated Section 179 deduction. This tax benefit allows businesses to deduct the full cost of qualifying equipment and software purchased or financed during the tax year, helping them invest in their operations while reducing taxable income.


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What’s New for 2025?

The Section 179 deduction limit has been updated to $1,160,000, with a phase-out threshold of $2,890,000. This means businesses can deduct up to $1,160,000 in qualifying purchases, but the deduction begins to phase out once total equipment purchases exceed $2,890,000.


What Qualifies for Section 179?

Eligible expenses include:

  • Machinery and equipment

  • Office furniture

  • Off-the-shelf software

  • Certain vehicles used for business purposes


Why It Matters

By leveraging Section 179, small businesses can lower their taxable income while reinvesting in growth. For example, if you purchase $50,000 in new equipment, you can deduct the full $50,000 from your taxable income, reducing your overall tax bill.


How to Maximize the Benefit

  • Plan Purchases Strategically: If you’re considering investing in equipment, plan to make those purchases during the tax year to qualify for the deduction.

  • Combine with Bonus Depreciation: Section 179 can be used alongside bonus depreciation for even greater tax savings.

  • Maintain Records: Keep receipts and documentation for all qualifying purchases to substantiate your deduction.


Example Scenario

A small business invests $100,000 in office equipment and software in 2025. Using the Section 179 deduction, the entire $100,000 can be deducted from their taxable income, saving thousands in taxes.


Act Now

Section 179 deductions are a year-by-year benefit, so planning ahead ensures you take full advantage of the savings. Don’t leave money on the table!


Have Questions? If you’re unsure about what qualifies or how to maximize your tax benefits, [contact us](insert link/contact info) for expert guidance.


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