Pays Less Taxes Timing big purchases to pay less tax this year

Without these rules, a machine's cost is spread out as depreciation across its useful life. These two rules let you deduct much or all of the cost in the first year instead.

Section 179 lets you choose to deduct the cost of qualifying equipment up to $2,560,000 for 2026. The limit starts to shrink once your purchases for the year pass $4,090,000, and the deduction can't be more than your business income.

Bonus depreciation covers 100% of the cost of qualified property acquired after January 19, 2025, and the law no longer phases it down. It has no dollar cap, and it can create a loss.

Both rules cover machinery, tools, computers, off-the-shelf software, furniture and many vehicles. Section 179 can also cover some improvements to business buildings, such as a new roof or a heating and cooling system. Cars and light trucks have their own yearly caps.

The deduction lands in the year the item is placed in service, which means it's set up and ready for the business. Paying a deposit or placing an order isn't enough.

So a machine delivered and running on December 28 counts for this year. The same machine on a truck until January 3 counts for next year.

If you also use the item personally, only the business share counts, and a vehicle needs a log that shows it.

A made-up print shop buys $25,000 of computers and a $35,000 cutting machine in November, and all of it is running by mid-December. That's $60,000 of equipment.

Deducting it all this year, in the 24% bracket, lowers federal income tax by about $14,400 for this year. Without the first-year write-off, the shop would spread that deduction over several years.

Over the life of the equipment, you deduct the same total. What changes is when you get it. It's worth the most in a high-profit year, or when you expect a lower bracket later. Some states follow their own depreciation rules, so the state return can differ.

A business on the cash method counts income when it's received and costs when they're paid. That makes a few timing moves possible.

• Pay deductible bills you already owe before December 31, such as supplies, repairs or a contractor's invoice.
• If a job finishes in late December, sending the invoice in early January moves that income into next year.
• Run payroll for an S corp salary, and make any 401(k) deferrals from it, before the last payday of the year.
• Set up an accountable plan and repay yourself for business costs you covered personally.

Each one has to match what really happened. A bill paid on December 30 counts this year. Moving a date on paper doesn't.

This doesn't lower the tax, but it keeps a penalty off the bill. For 2026, quarterly estimated payments are due April 15, June 15 and September 15, 2026, and January 15, 2027.

You avoid the underpayment penalty when your payments cover at least 90% of this year's tax, or 100% of last year's. If last year's adjusted gross income was over $150,000, the second test is 110% of last year's tax.

Can I buy something in December and deduct it all? Often, yes, if it's in use for the business by December 31 and you'd buy it anyway.

Is it always better to deduct it all now? No. If you expect next year's income to be much higher, spreading the deduction out can save more. We compare both on the call.

Does a used item count? Used equipment can qualify for both Section 179 and bonus depreciation, as long as it's new to you and bought from someone unrelated.