Section 179 for IT Purchases: What Business Owners Should Know for 2026

The Section 179 deduction for 2026 lets a business elect to deduct up to $2,560,000 of qualifying equipment and off-the-shelf software in the year it is placed in service, instead of depreciating it over several years. The limit is reduced once total qualifying purchases for the year pass $4,090,000. For most organizations buying laptops, servers and firewalls, the dollar cap never comes into play. The rules that matter are timing, ownership and your business income.

Every December the same question comes up: buy the new laptops and firewall now, or wait? We are an IT company, and your CPA has the final word on tax, so use this to prepare for that conversation.

How Section 179 works

Normally, when a business buys equipment that lasts more than a year, it depreciates the cost over the asset’s useful life. Section 179 of the Internal Revenue Code lets you elect to treat the cost of qualifying property as an expense in the year you place it in service instead. You make the election on IRS Form 4562 with your return.

The practical effect is cash flow. If you buy $40,000 of computers, network gear and software this year, you may be able to deduct most or all of it on this year’s return rather than a slice each year. Whether that is the right move depends on your income, entity type and plans, so the decision belongs with your tax advisor.

Section 179 deduction limits for 2026

The One Big Beautiful Bill Act, passed in 2025, raised the Section 179 limits sharply. For tax years beginning in 2025, the maximum deduction was $2,500,000, with a phase-out starting at $4,000,000 of qualifying purchases. Those figures are now adjusted for inflation each year.

• The limit drops dollar for dollar once the cost of Section 179 property you place in service during 2026 goes over $4,090,000.
• The deduction can’t exceed your taxable income from the active conduct of your business. Any amount you can’t use carries forward.
• Certain sport utility vehicles are capped at $32,000 for 2026, which matters if a company vehicle is on your list too.

Most small and mid-sized businesses will never come close to the dollar limit. For them, the business income limit and the placed-in-service deadline are the rules that actually matter.

Which IT purchases can qualify

According to IRS Publication 946, qualifying property includes tangible personal property, off-the-shelf computer software, and certain improvements to nonresidential buildings. In IT terms, that typically covers:

• Desktops, laptops, tablets and monitors.
• Servers, storage and backup appliances.
• Firewalls, switches, wireless access points and other network equipment.
• Phones and conferencing equipment.
• Printers, copiers and scanners.
• Off-the-shelf software that you buy under a nonexclusive license and that hasn’t been substantially modified.
• Security systems added to an existing nonresidential building, which the IRS lists as qualified Section 179 real property.

Monthly subscriptions, such as Microsoft 365 licenses or cloud hosting, are ongoing operating costs rather than equipment you own, so ask your CPA how they are handled instead of assuming they fall under Section 179. Used equipment can qualify if it is new to you and bought from an unrelated party.

Rules that trip people up

Placed in service means ready to use

The IRS ties the deduction to when property is placed in service, which it describes as ready and available for a specific use. Ordering ten laptops on December 28 doesn’t help if they arrive in January. Allow time for shipping, imaging, security setup and data migration, especially in the last two months of the year, when vendors and IT teams are busiest.

Financing and leasing are treated differently

Equipment you buy with a loan or financing can qualify because you own it. Equipment under a true lease generally does not, since the leasing company owns it. If you are comparing a lease to a purchase, get the tax treatment of each option from your advisor first.

Mixed personal and business use

If a device is used for both business and personal purposes, the IRS only allows the Section 179 election when business use is more than 50% in the year it is placed in service, and only for the business-use share of the cost.

Bonus depreciation and the de minimis safe harbor

Section 179 isn’t the only option. The 2025 law restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025, and the IRS de minimis safe harbor lets many businesses deduct items costing up to $2,500 per invoice or item. Your CPA can tell you which combination fits your return.

How the way you pay fits in

We offer three ways to pay for equipment: outright purchase, financing through a third-party lender for hardware you will own, and a hardware subscription, where we own the equipment and you use it. Purchased and financed equipment is yours, which is the kind of property Section 179 is written for. With a hardware subscription the equipment stays ours, so ask your CPA how those payments are treated. The right choice often differs by device, and many of our clients end up with a mix. Our guide to hardware as a service compares all three.

Plan year-end IT purchases around real needs

A tax deduction is a good reason to buy something you already need sooner. It is a poor reason to buy something you don’t need.

1. Start with an inventory of every computer, server and network device with its age, warranty date and operating system. Anything still running Windows 10, which reached end of support on October 14, 2025, belongs near the top.
2. Flag security gaps. Firewalls and switches that no longer get firmware updates, and computers that can’t run current security software, are risks as well as replacement candidates.
3. Build a short list with your IT provider, prioritized by risk and business impact, then by age.
4. Review it with your CPA by November.
5. Order early, leaving time for delivery, setup and testing before your tax year ends.

A written technology lifecycle plan makes this easier, because you already know what is due each year. Our guide to an IT refresh plan shows how to build one.

As a Microsoft CSP partner and a Xerox managed print partner, we can source, set up and secure new equipment for you. Before new devices go into use, make sure they are enrolled in management, encrypted, patched and protected. Before old ones leave, wipe or destroy the data and keep a record. HIPAA and the FTC Safeguards Rule both expect you to protect sensitive data through the whole life of the equipment that stores it, including the day it is retired. Our compliance services page covers how.

If year-end purchases are on your list, start early enough that the equipment is installed and working before your tax year closes. Book a 20-minute call with us for the technology side, then take the plan to your CPA.

Sources: IRS Publication 946 (2025), How To Depreciate Property; IRS Revenue Procedure 2025-32 (2026 inflation adjustments); Grant Thornton, Interim guidance issued for revived bonus depreciation (Notice 2026-11), 2026; IRS, Tangible Property Final Regulations (de minimis safe harbor); Microsoft Learn, Extended Security Updates program for Windows 10.