100% Write-Offs Are Back: Why Buying Equipment Before December 31 Could Cut Your 2026 Tax Bill

If you have been putting off a big equipment purchase, 2026 may be the year to stop waiting.

Last year's federal tax law (the One Big Beautiful Bill Act) permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, and it raised the Section 179 expensing limit to $2.56 million for 2026. In plain terms: if you buy qualifying equipment and put it to work before December 31, 2026, you may be able to deduct the entire cost on your 2026 tax return, instead of spreading the deduction over several years.

That can be a powerful planning tool. But it only works if you act before the calendar runs out, and it does not make sense for every purchase. Here is what small business owners should know.

How the two write-off tools work

There are two ways to write off equipment in the year you buy it.

Section 179 is an election you make on your tax return. You choose which assets to expense, up to $2.56 million in 2026. Two limits matter. First, the phase-out: once a business places more than $4.09 million of qualifying property in service in a year, the deduction shrinks, though few small businesses come close to that. Second, your business income: Section 179 cannot exceed your taxable income from the business. It can reduce this year's tax to zero, but it cannot create or increase a loss.

Bonus depreciation works differently. It applies automatically to qualifying property, has no dollar cap, and can push a business into a loss, which can be useful in a strong-income year. Many businesses use Section 179 first, then apply bonus depreciation to whatever cost is left.

One fact surprises many owners: you can finance the equipment and still deduct the full purchase price this year.

What qualifies, and the December 31 rule

Qualifying property includes machinery, equipment, computers, office furniture, business software, and work vehicles. Certain interior improvements to nonresidential space also qualify. Section 179 additionally covers roofs, HVAC systems, and security systems on commercial buildings. Used equipment counts too, as long as it is new to you. One date matters for bonus depreciation: to qualify for the 100% rate, the property generally must be acquired after January 19, 2025.

The critical rule is timing. To count for 2026, the equipment must be placed in service by December 31. That means ready and available for its intended business use, usually meaning delivered and installed. Signing a contract or paying a deposit in December is not enough if the machine arrives in January. Equipment placed in service in 2026 is claimed on your 2026 tax return, which most calendar-year businesses file in 2027.

For vehicles there is one more condition: the vehicle must be used more than 50% for business. Heavy SUVs between 6,000 and 14,000 pounds have a special Section 179 cap of $32,000 for 2026. That cap does not limit bonus depreciation, so the remaining cost may still qualify for a first-year write-off, though your business-use percentage, the vehicle's classification, and other applicable rules still apply.

When it makes sense, and when it does not

A full first-year write-off is most valuable when your business is having a profitable year and you are buying equipment you will use for a long time. In that case the deduction directly reduces your 2026 tax, and a deduction is generally worth more in a year when your marginal tax rate is higher.

Little or no profit this year. Section 179 cannot exceed your business income, so the election gives you nothing right now (unused amounts can generally carry forward). Bonus depreciation can create a loss, but a loss only helps if you have other income to offset or can carry it forward usefully.

Buying just for the tax break. A 30% tax saving on equipment you do not need still costs you the other 70%. Never let the deduction drive the purchase.

Short-lived equipment you will replace soon. If you plan to replace the asset in two years anyway, spreading the deduction over time may match the economics better.

Maryland state tax differs from federal rules. Maryland generally decouples from federal bonus depreciation for nonmanufacturing businesses, so a state-level adjustment is typically required. Maryland also generally limits Section 179 for these businesses to $25,000, reduced as qualifying purchases exceed $200,000. Certain manufacturers may qualify for better treatment. Your federal deduction may end up much larger than your Maryland deduction, so ask your advisor to calculate both.

What to do now

October is decision time. Delivery and installation lead times can stretch for weeks, so if you are considering a purchase, start the process now so the equipment is genuinely in service by December 31.

Keep your invoices and delivery receipts, and note the date the equipment was ready for use. Tell your tax advisor about the purchase before you file: Section 179 requires an election on the return, and bonus depreciation has opt-out rules, so the paperwork matters.

A year-end equipment purchase will not be right for every business. But for a profitable small business that genuinely needs the equipment, 2026 offers one of the most generous write-off environments in years. Talk with a qualified tax advisor about whether this move fits your situation.