Section 179 Deduction 2025: Don’t Miss These Expiring Tax Benefits

Technology and other qualifying equipment purchases have been eligible for an attractive tax deduction for decades. This offered some incentives for small and medium businesses (SMBs) to make the upgrades they needed for their company to grow, but there were barriers, such as the need to recover the cost of the purchases through depreciation. That meant the deduction process was long and arduous. For SMBs that relied on those tax deductions to keep technology purchases within a tight budget, the deduction process was a hinderance, enough so that organizations put off upgrades.

This changed with the passing of the One Big Beautiful Bill (OBBB), which was signed into law on July 4, 2025. Technology and equipment purchases can now qualify for significant tax deductions under Section 179, which “allows small and mid-sized businesses to immediately deduct up to $2.5 million of purchases in the year that the assets are placed in service,” doubling the previous limit of $1.25 million, according to the Bipartisan Policy Center.

The tax code outlined in Section 179 also allows for an immediate deduction of equipment, rather than the five-to-seven-year depreciation deduction.

“This tax incentive is designed to improve cash flow, reduce the cost of capital and encourage businesses to reinvest in their operations,” the Center reported.

Understanding the Small Business Tax Incentive: Section 179 and Bonus Depreciation

Section 179 Deduction Changes

Section 179 is a long-standing IRS tax code determining the deductions on businesses’ new and used equipment and has regularly been updated and reconfigured to meet changing technology needs. OBBB’s language is the latest such update.

“In 2025, these deductions are capped at $2.5 million and begin to phase out dollar for dollar when total eligible purchases exceed $4 million. The deduction fully phases out once total purchases reach $6.5 million,” the Bipartisan Policy Center explained.

OBBB also broadens the type of business equipment that meets Section 179 eligibility requirements by including more categories around the modern IT and cybersecurity infrastructure.

Bonus Depreciation

Section 179 isn’t the only significant change to tax code that impacts SMBs and purchasing power. Section 168(k) reinstates 100% bonus depreciation – the entire purchase price – for qualifying assets acquired and put into service after January 19, 2025. The prior reduction schedule was a 40% reduction.

Benefits of Upgrading Your IT infrastructure by December 31, 2025

Why should you consider making an IT or cybersecurity purchase before December 31? Several reasons:

• You get immediate expensing on your purchase under Section 179 for the 2025 tax year
• The bonus depreciation (full purchase price of qualifying equipment)
• The expanded equipment eligibility, including items such as backup power and data center climate controls
• Overall business operation improvements now rather than waiting for next year.

For SMBs looking to upgrade their equipment and off-the-shelf software, OBBB’s Section 179 expansion is a game-changer. It allows firms to modernize cybersecurity defenses and digital infrastructure while capturing immediate tax savings. This makes investments in servers, firewalls, laptops, and licensed software not just operationally critical but also financially efficient, especially for those looking to make purchases before the ball drops on 2025.