Construction Equipment Tax Savings Section 179 Gets $30K Boost for 2025

Section 179 gets a $30,000 increase (and if history is any indication, Bonus Depreciation could be next). Construction companies’ favorite tax deduction — Section 179 — has been increased by $30,000 for 2025, bringing the total deduction to $1,250,000. This is welcome news for construction companies of all sizes.

Section 179 in Plain English

Section 179 is a simple but highly effective tax deduction. In short, it’s a form of accelerated depreciation. Typically, when a company buys eligible new or used business equipment, it can depreciate that equipment gradually each year (often around 20 precent per year). However, Section 179 allows you to deduct 100 percent of the purchase price in the first year — up to a combined total of $1,250,000 for the calendar year. This can make a massive difference to a company’s bottom line.

The best part for construction companies is the broad range of equipment that qualifies for Section 179: heavy equipment, heavy machinery, tools, generators, lighting, power washers, trucks and business vehicles and more. Even most office equipment (computers, laptops, copiers, furniture & fixtures, etc.) will qualify, as will many common software applications.

There’s more good news: the equipment can be new or used, and financed equipment counts as well. In fact, taking a full-price deduction while financing can result in tax savings that exceed your first year’s payments — a strong financial incentive to acquire needed equipment sooner rather than later.

Section 179 in Action

Let’s say your company buys a new backhoe for $115,000. Using Section 179, you can deduct the entire $115,000 cost from your taxable income. At a 35 percent tax rate, that translates to $40,250 in tax savings – real dollars that stay with you instead of going to Uncle Sam. In other words, your bank account will be $40,000+ higher by taking advantage of Section 179. Or you could look at it as a hefty discount on the price of the backhoe. No matter how you view it, that $40k is yours. Nice, right?

Keep in mind there is a deadline: the equipment must be purchased or financed and placed into service by December 31 of the tax year. You also need taxable income to take the deduction (in other words, Section 179 cannot be used to create a loss).

What About Bonus Depreciation?

Bonus Depreciation is often mentioned alongside Section 179 because they serve similar purposes. In fact, many companies use Bonus Depreciation after they hit Section 179’s total spending limit of $3,130,000. Because once you exceed that threshold, the Section 179 deduction begins to phase out. This makes it a true small/midsize business tax deduction, as most smaller companies won’t spend $3 million-plus on equipment in a year.

Bonus Depreciation can also be used if a company has no taxable income — so sometimes it’s used instead of Section 179. So be sure to ask your accountant which is right for you.

Under the 2017 Tax Cuts and Jobs Act, Bonus Depreciation was initially set at 100 percent, but it was scheduled to drop by 20 percent each year starting in 2023. That means in 2025, Bonus Depreciation currently stands at 40 percent. However, because Donald Trump was the architect of the Tax Cuts and Jobs Act, many tax experts believe there’s a strong possibility Bonus Depreciation could return to 100 percent now that he’s back in office. If that happens, it would be welcome news for larger construction companies that spend more than $3 million annually on equipment, or for companies that expect to have a loss in 2025.

Wrapping Up

Every construction company purchasing equipment in 2025 should be aware of Section 179. It’s straightforward and quite easy to claim: simply use IRS form 4562. It can make a marked difference in your bottom line and can make acquiring needed equipment, either new or used, financially advantageous.

Of course, my standard disclaimer applies: This piece is meant to make you aware of Section 179 and its possibilities. It is not tax advice. Always consult your accountant or tax professional before making any tax-related purchase or financial decision. That said, my money is on your accountant being all-in on Section 179. It’s there to encourage small and midsize American businesses to self-invest and purchase needed equipment, and it does its job very well.

Dan Furman is the Vice President of Strategy at Crest Capital, which provides small and mid-sized companies restriction-free financing for new and used equipment, vehicles, and software, as well as offering equipment sellers a simple and risk-free financing program. Visit them online at www.crestcapital.com 

All views expressed in this article are opinions — always speak to your accountant, tax, or insurance professional before engaging in any purchase, financial contract or tax matter.