Should I buy business equipment before December 31?

If you need it anyway, buying it and putting it to use before December 31, 2026 can usually let you deduct the full cost on your 2026 federal return. If you don't need it, the deduction alone is rarely a good reason to buy. A deduction saves you your tax rate, not the price of the equipment.

Here's what has to happen, and where people trip up.

Ordering it isn't enough. It has to be in service.

For depreciation and the full write-off, what counts is the date the equipment is placed in service: ready and available to do the job it was bought for (Treasury Regulation §1.167(a)-11(e)(1)). Paying for it or signing the order doesn't count.

• A trailer that's sitting at the dealer on December 31 usually isn't in service yet.
• A machine that's delivered but still crated and waiting to be installed usually isn't either.
• A laptop that's set up and on your desk December 30 usually is, even if you didn't use it much before the year ended.

If the delivery date is tight, don't count on the deduction until the equipment is actually on site and ready to use.

The two federal ways to write it off in one year

Section 179 expensing. You can elect to deduct the cost of qualifying equipment in the year it's placed in service instead of depreciating it over several years (IRC §179). For tax years beginning in 2026, the limit is $2,560,000, and it starts shrinking once you place more than $4,090,000 of equipment in service in the year (Rev. Proc. 2025-32). Section 179 can't create a loss: the deduction is limited to your taxable income from active businesses, and any extra carries forward (IRC §179(b)(3)).

Bonus depreciation. Federal law now allows 100% bonus depreciation for qualifying property acquired after January 19, 2025 (IRC §168(k), as amended by Public Law 119-21; IRS Notice 2026-11). Bonus depreciation has no dollar cap and can create a loss. Used equipment can qualify for either one as long as you didn't use it before.

Which one to use, or whether to spread the deduction out instead, depends on your income this year and next, and on your state return. That's where New York comes in.

Cars, trucks and SUVs have their own limits

Vehicles are where the "write off the whole thing" idea most often goes wrong.

• Cars, and trucks and vans under the weight limits: for a passenger vehicle placed in service in 2026, the first-year depreciation cap is $20,300 with bonus depreciation, or $12,300 without it (IRC §280F(a); Rev. Proc. 2026-15). The rest is spread over later years.
• Heavy SUVs (gross vehicle weight rating over 6,000 pounds): they aren't held to those caps, but the Section 179 deduction for an SUV is limited to $32,000 for 2026 (IRC §179(b)(5); Rev. Proc. 2025-32).
• Business use has to be over 50% to use Section 179 or bonus depreciation on a vehicle, and you only deduct the business share (IRC §280F(b)). Keep a mileage log.

New York doesn't follow all of it

This is the part a lot of people miss. The rules above are federal.

• New York does not follow federal bonus depreciation. For property placed in service on or after June 1, 2003 (other than a few special zones), you add the federal bonus depreciation back on your New York return and take New York's own depreciation instead (NY Tax Law §612(b)(8) and §612(k); Form IT-398; Form IT-225, code A-209). The state deduction still comes, just spread out over more years.
• New York generally follows Section 179, because your New York income starts from your federal adjusted gross income (NY Tax Law §612(a)). If you used Section 179 instead of bonus depreciation, there's usually no state add-back.
• The exception is heavy SUVs. If you took Section 179 on an SUV over 6,000 pounds, New York makes you add it back (Form IT-225, code A-208). Pickups with an open cargo bed and vans don't count as SUVs for this rule.

So for a New York business owner, choosing Section 179 over bonus depreciation can keep the federal and state deductions closer together. The right mix depends on your numbers.

What the deduction actually saves you

A deduction lowers your taxable income. It doesn't give you the money back.

Say you're a sole proprietor in the 22% federal tax bracket and you buy a $10,000 piece of equipment:

Self-employment tax and New York tax can add to the savings, but you'll still be paying most of the price yourself. If you'd have bought the equipment next spring anyway, buying it in December mainly moves the deduction into this year. If you wouldn't have bought it at all, you've spent $10,000 to save a fraction of that.

Two more things to keep in mind:

• A big deduction this year means no deduction later. If you expect to be in a higher bracket next year, spreading the deduction out can be worth more.
• Selling it later can bring some of the deduction back as income. If you sell equipment you wrote off, the gain up to the deductions you took is usually taxed as ordinary income (IRC §1245).

If you make estimated payments, a large December purchase can also change how much you owe for the fourth quarter. See our guide to quarterly estimated taxes.

How we help

We prepare federal and New York returns for self-employed people and small businesses, fully remote, and we keep the books for businesses that want the numbers right all year. Before you buy, we can look at your year so far and tell you roughly what the purchase would save on both returns, and whether Section 179 or bonus depreciation fits better.

Shane Panas is an IRS PTIN holder, a New York State registered tax return preparer and a Certified QuickBooks ProAdvisor (Level 2).

Book a free 15-minute call and we'll go over your year-end plans before the deadline.

Sources

• Internal Revenue Code §179 (election to expense equipment), §179(b)(3) (business income limit), §179(b)(5) (SUV limit)
• Internal Revenue Code §168(k) (bonus depreciation), as amended by Public Law 119-21; IRS Notice 2026-11
• Internal Revenue Code §280F (vehicle limits and the over-50% business-use rule) and §1245 (recapture)
• Treasury Regulation §1.167(a)-11(e)(1) (when property is placed in service)
• Rev. Proc. 2025-32, §4.24 (2026 Section 179 and SUV amounts)
• Rev. Proc. 2026-15, Tables 1 and 2 (2026 passenger vehicle limits)
• IRS Publication 946, How To Depreciate Property
• NY Tax Law §612(a), §612(b)(8) and §612(k); NYS Forms IT-398 and IT-225 instructions (codes A-208 and A-209)

Frequently asked questions

Can I deduct equipment I order in December but receive in January?

Usually not on this year's return. The deduction depends on when the equipment is placed in service, meaning ready and available for its job, not when you order or pay for it.

What is the Section 179 limit for 2026?

For tax years beginning in 2026, the federal Section 179 limit is $2,560,000. It starts phasing out once you place more than $4,090,000 of equipment in service during the year. Heavy SUVs are limited to $32,000.

Does New York allow bonus depreciation?

No. New York doesn't follow federal bonus depreciation for most property, so you add it back on the state return and depreciate it under New York's rules. New York generally does follow Section 179, except for SUVs over 6,000 pounds.

Is it worth buying equipment just for the tax deduction?

Usually not. A deduction saves you roughly your tax rate on the cost. In the 22% bracket, a $10,000 purchase saves about $2,200 in federal income tax, so you still pay most of the price.

General information, not advice for your situation.