A new truck, a skid steer, a trailer full of tools. For a construction business, equipment is often the biggest expense of the year, and how you deduct it can change your tax bill by tens of thousands of dollars.
The two tools that matter are Section 179 and bonus depreciation. Both let you deduct most or all of an equipment purchase in the year you buy it instead of spreading it over five to seven years. Here's how they work for 2026, and the mistakes we see contractors make with them.
2026 at a glance
- Section 179 limit: $2,560,000, reduced dollar-for-dollar once total equipment purchases pass $4,090,000
- Bonus depreciation: 100% for qualifying property acquired after January 19, 2025
- Heavy SUV cap: $32,000 under Section 179
- Deadline: equipment must be placed in service by December 31, 2026
What counts as Section 179 property for contractors?
Most tangible equipment you use in the business qualifies, whether it's new or used (as long as it's new to you):
- Excavators, skid steers, loaders, lifts and other heavy equipment
- Work trucks, vans and trailers
- Power tools, generators, compressors and scaffolding
- Computers, tablets and estimating or project software you buy outright
- Office furniture and job-site storage containers
Land and buildings don't qualify. Some building improvements, such as roofs and HVAC systems on nonresidential property, can.
Section 179 vs. bonus depreciation: what's the difference?
| Section 179 | Bonus depreciation | |
|---|---|---|
| 2026 limit | $2,560,000 | No dollar limit |
| Limited to business income? | Yes, can't create a loss | No, can create a loss |
| Pick and choose assets? | Yes, asset by asset | Applies by asset class unless you opt out |
| Illinois treatment | Illinois doesn't follow federal bonus depreciation, so your state return can look different from your federal one | |
In practice we often use both: Section 179 to fine-tune how much you deduct, and bonus depreciation for the rest. The right mix depends on this year's profit and what you expect next year.
The truck question: what you can deduct on a vehicle
Vehicles are where contractors get the most confused, because the rules depend on weight.
Under 6,000 lbs gross vehicle weight
Regular cars and light trucks fall under the "luxury auto" limits, which cap the first-year deduction. You can still deduct the business-use share, just more slowly.
Over 6,000 lbs gross vehicle weight
Heavier trucks and vans can qualify for a much larger first-year write-off. Check the GVWR on the sticker inside the driver's door, not the curb weight.
- Heavy SUVs are capped at $32,000 under Section 179 in 2026, though bonus depreciation can cover more.
- Pickups with a cargo bed at least six feet long, and cargo vans without rear seating, are generally not subject to that SUV cap.
Business use has to be over 50%
To use Section 179 on a vehicle, it must be used more than 50% for business, and you need a mileage log to prove it. If business use later drops to 50% or less, part of the deduction is "recaptured" and added back to your income.
"Placed in service" by December 31
This is the rule that catches people in December. To deduct equipment on your 2026 return, it must be placed in service by December 31: delivered, set up and ready to use. Signing a purchase order on December 28 for a machine that arrives in January doesn't count for 2026.
Financed equipment still counts
You can take the full deduction even if you financed the purchase. A $90,000 truck with $10,000 down can produce a deduction close to $90,000 this year, depending on business use. That's why year-end equipment purchases are popular, and also why they can backfire.
4 mistakes we see contractors make
Buying equipment just for the deduction
A deduction saves you a percentage of the cost, roughly your tax rate. Spending $60,000 to save $18,000 only makes sense if you needed the equipment anyway.
Writing everything off in a low-income year
A big deduction is worth more in a high-profit year. If this year is slow and next year looks strong, spreading the deduction out can save more overall.
No mileage log for the truck
Without a log, the IRS can deny the business-use percentage and the deduction with it.
Forgetting the sale later
When you sell or trade in fully deducted equipment, the gain is usually taxable. Plan for it before trading up.
Planning a big purchase before year-end?
Most accountants only hear about your new truck in April, when it's too late to plan. Talk to an Enrolled Agent now and we'll run the numbers before you buy. Flat price quoted up front.
Book a Free 30-Minute CallBottom line
Section 179 and bonus depreciation are two of the most valuable tools a construction business has. Used well, they lower your taxes in the years you need it most. Used without a plan, they can leave you with a big tax bill the year you sell the equipment. Want a quick checklist? Download our free 2026 Year-End Tax Checklist for Contractors.