Section 179 Tax Deduction 2019: Limits, Phase-Out, and Vehicles

For the 2019 tax year, the Section 179 tax deduction let a business immediately expense up to $1,020,000 of qualifying equipment and software instead of depreciating it over several years.¹ That maximum began to shrink once total qualifying purchases crossed $2,550,000, and it disappeared entirely at $3,570,000 in spending. Many online calculators still show $1,000,000 and $2,500,000 for 2019, but those were the 2018 figures. The higher numbers are the inflation-adjusted amounts the IRS set for tax years beginning in 2019.

The 2019 Dollar Limits and How the Phase-Out Worked

The phase-out reduced the maximum deduction dollar-for-dollar for each dollar of qualifying purchases above $2,550,000. A business that placed $2,700,000 of eligible property in service during 2019 exceeded the threshold by $150,000, so its maximum Section 179 deduction dropped to $870,000. At $3,570,000 of purchases, the deduction reached zero.² The design kept the benefit pointed at small and mid-sized operations rather than large capital-intensive companies.

What Property Qualified in 2019

Section 179 covered most tangible personal property used in a trade or business: machinery, manufacturing equipment, office furniture, computers, and similar assets. Off-the-shelf software available to the general public under a non-exclusive license also qualified. The property had to be purchased rather than leased from someone else, and it had to be placed in service during the 2019 tax year.³

Used equipment qualified as readily as new. What mattered was that the asset was new to your business, not new from the factory. You could not, however, claim Section 179 on property bought from a related party such as a spouse, ancestor, or lineal descendant. Siblings sat outside the related-party rule, so equipment purchased from a brother or sister did not trigger disqualification.

Qualified Improvement Property

The Tax Cuts and Jobs Act expanded Section 179 to cover certain interior improvements to nonresidential buildings, including new roofing, HVAC systems, fire alarms and suppression systems, and security systems.⁴ Improvements could not enlarge the building, add elevators or escalators, or alter internal structural framework.

A drafting error in the TCJA left qualified improvement property classified as 39-year property, which blocked it from bonus depreciation in 2018 and 2019. Section 179 remained available for QIP during 2019. The CARES Act of 2020 later corrected the error retroactively to January 1, 2018, and businesses that had already filed 2019 returns could amend to claim the better treatment.

Vehicle Caps

Heavy SUVs had their own ceiling. For 2019, the maximum Section 179 deduction for any sport utility vehicle was $25,500.¹ That cap applied to four-wheeled vehicles with a gross vehicle weight rating between 6,000 and 14,000 pounds. Vehicles above 14,000 pounds were not classified as SUVs under the tax code and could qualify for the full deduction.

Standard passenger vehicles under 6,000 pounds GVWR faced much tighter limits. For a passenger car placed in service during 2019, the total first-year deduction combining Section 179, bonus depreciation, and regular depreciation topped out at $18,100 with bonus depreciation or $10,100 without it.⁵ Section 179 did comparatively little for lighter cars.

Business-Use and Income Limits

Any asset expensed under Section 179 had to be used in the trade or business more than 50% of the time. The IRS measured actual usage in hours, miles, or another reasonable method. If an asset split time between business and personal use, only the business-use percentage of its cost was eligible, and dropping to 50% or below meant the asset did not qualify at all.³

The deduction was further limited to the taxpayer’s total taxable income from all active trades or businesses. Section 179 could not push a profitable business into a net operating loss. A business earning $600,000 with $900,000 of eligible equipment could deduct $600,000 in 2019. The remaining $300,000 carried forward indefinitely, subject to the same limits in later years.³

Section 179 vs. Bonus Depreciation in 2019

2019 also offered 100% bonus depreciation on qualifying business assets, which raises a fair question: why elect Section 179 at all? The two tools overlapped but were not identical.

Section 179 let you choose exactly which assets to expense and how much of each asset’s cost to write off, giving fine-grained control over taxable income. Bonus depreciation was all-or-nothing within an asset class and applied automatically unless you elected out. Under the TCJA, bonus depreciation had been expanded to cover used property, narrowing what had once been a meaningful distinction.

The most consequential difference was the income limitation. Section 179 could not create a net operating loss; bonus depreciation could. A common approach was to apply Section 179 up to the income cap and let bonus depreciation absorb the rest. A business expecting a loss year in 2019 might instead have leaned on bonus depreciation and saved the Section 179 election for a profitable year when the income limit would not bite.

Recapture When Business Use Drops

Claiming Section 179 in 2019 created a lasting obligation. If business use of the asset falls to 50% or below during its recovery period (typically five or seven years for equipment), the IRS requires recapture of part of the deduction as ordinary income.⁶ This most often catches owners of vehicles that gradually drift toward personal use.

To calculate recapture, figure the regular depreciation that would have been allowable from the year the property was placed in service through the year business use dropped. Subtract that figure from the Section 179 deduction originally claimed. The difference is reported as ordinary income on Part IV of Form 4797 and flows to the schedule where the deduction was originally taken, such as Schedule C for a sole proprietor.⁶

For example: you claimed a $40,000 Section 179 deduction on equipment in 2019 and business use fell to 40% in 2021. You would calculate normal depreciation for 2019, 2020, and 2021, subtract that from $40,000, and report the difference as ordinary income for 2021. Your basis in the property increases by the recapture amount, which restores some depreciation deductions going forward.

Filing the Election on Form 4562

The Section 179 deduction was claimed on Part I of Form 4562, Depreciation and Amortization. Line 6 listed each asset’s description, its cost (limited to the business-use portion, including shipping and installation), and the amount elected to expense.⁷ Only one Part I was completed per return, even for taxpayers with multiple businesses.²

Form 4562 attached to the taxpayer’s primary return: Schedule C on Form 1040 for sole proprietors, Form 1065 for partnerships, and Form 1120 or 1120-S for corporations. The election was made simply by completing the form and filing the return on time, including extensions.

Revoking a Section 179 election required an amended return, and only within the normal amendment window (generally three years from the original filing date or two years from the date the tax was paid, whichever is later). Once revoked, the revocation itself was permanent.⁸ For a 2019 return filed on the April 2020 deadline, that window has closed, so both the original election and any revocation made within the window are now locked in.

1
Internal Revenue Service. Revenue Procedure 2018-57
2
Internal Revenue Service. Instructions for Form 4562 – Depreciation and Amortization 2019
3
Office of the Law Revision Counsel. 26 USC 179 – Election To Expense Certain Depreciable Business Assets
4
Internal Revenue Service. Depreciation Expense Helps Business Owners Keep More Money
5
Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses
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Internal Revenue Service. Publication 946 – How To Depreciate Property
7
Internal Revenue Service. Form 4562 – Depreciation and Amortization 2019
8
Internal Revenue Service. Instructions for Form 4562