What does not qualify
eight common year-end mistakes.
Most lost deductions come from a few avoidable mistakes. Check each of these with your adviser before you commit to a year-end purchase.
Not tax advice. Talk to your tax adviser or CPA about your situation. Information is current for the 2026 U.S. federal tax year (checked October 29, 2026); state rules differ.
Mistakes and how to avoid them.
- Buying inventory instead of equipment. A machine a dealer holds for resale is inventory. Publication 946 says inventory cannot be depreciated because it is not held for use in your business. Stocking up on goods to resell does not create a Section 179 deduction; their cost is generally recovered when they are sold.
- Missing the placed-in-service date. A machine paid for in December but installed in January belongs to the next tax year. See the backward timeline.
- Buying from a related person. Purchases from your spouse, ancestors or lineal descendants, from businesses they or you control by more than 50%, or within a controlled group do not qualify for Section 179.
- Business use of 50% or less. Section 179 needs more than 50% business use in the first year, and the benefit can be recaptured if business use later drops to 50% or less.
- Expecting Section 179 to exceed business income. The Section 179 deduction is limited to your taxable business income; the excess carries forward. Bonus depreciation does not have this limit.
- Assuming your state follows the federal rules. Many states limit or do not adopt Section 179 or bonus depreciation. Ask how your state treats each.
- Forgetting the election. Section 179 is claimed on Form 4562, Part I. Opting out of bonus depreciation is a separate, class-by-class election made with a timely return.
- Assuming a 100% rate on an older contract. A machine bought under a written binding contract signed before January 20, 2025 follows the older, lower bonus rate.
Vehicles and real property.
The Section 179 cost of a sport utility vehicle is capped at $32,000 for 2026. Land cannot be depreciated at all, and buildings and building improvements follow separate rules. Selling a machine you expensed can also create taxable income later; ask your adviser before you sell.
The Section 179 guide.
Where these facts come from.
- IRS Publication 946, How To Depreciate Property
- 26 U.S.C. 179 (election to expense certain depreciable business assets)
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments, section 179 limits)
- Instructions for Form 4562, Depreciation and Amortization
- IRS Notice 2026-11 (100% additional first-year depreciation)
Published by Delta Arc, LLC · Editor: Michael Davis · Last reviewed October 29, 2026.
Not tax advice. Talk to your tax adviser or CPA about your situation. Information is current for the 2026 U.S. federal tax year (checked October 29, 2026); state rules differ.