Business tax breaks (section 179, bonus depreciation and credits)
Federal tax rules that let you deduct the cost of equipment in the year you buy it, and credits for things like offering staff health insurance. They cut the tax you owe, so they help only if the business has taxable profit or tax to pay, and they come after you have spent the money.
- No security
How it works
These are not loans or grants: they reduce your tax bill, which leaves more cash in the business.
- Section 179: instead of spreading the cost of equipment and some other property over several years, you can deduct it in the year you start using it. For tax years beginning in 2026, the deduction is up to $2,560,000, reduced dollar for dollar once the property you put into service in the year costs more than $4,090,000 (and up to $32,000 for sport utility vehicles).
- Bonus (special) depreciation: the 2025 budget law (Public Law 119-21) brought back a 100% first-year allowance for qualifying property acquired and put into service after January 19, 2025, and added an elective 100% allowance for "qualified production property" put into service after July 4, 2025 (your tax preparer can tell you whether yours qualifies). You can choose a smaller allowance instead.
- Small business health care tax credit: an employer with fewer than 25 full-time equivalent employees and average wages under an inflation-adjusted limit, that pays at least 50% of employee-only premiums for a plan bought through the SHOP Marketplace, can get a credit of up to 50% of the premiums it pays (35% for tax-exempt employers), for two consecutive years. The smaller the employer, the bigger the credit.
- Research credit: for research and development, see the research credit route, which a qualified small business can set against payroll tax.
What to watch: a deduction in the first year means smaller deductions later, and if business use of section 179 property drops to 50% or less during its recovery period, you must add part of the deduction back to your income (recapture). Ask your tax preparer which reliefs fit your situation before you buy.
Upsides and downsides
Upsides
- No application, interest or repayment; you claim it on your return
- Can make buying equipment much cheaper after tax
- No ownership given up
Downsides
- Helps only if you owe tax
- Comes after you have spent the money, not before
- Writing off cost now means smaller deductions later
Risks
- If business use of the property drops to 50% or less, part of the section 179 deduction comes back as income
- Rules change often; the 2025 budget law changed several of them
What it costs
- How it is priced
- No cost beyond your tax preparer's fees; the benefit is tax you do not pay
- Costs that are easy to miss
- Tax preparer's fees for working out and claiming the relief
- Smaller deductions in later years, once the cost has been written off
The tax saved, which depends on your tax rate and profits. Section 179 is capped at $2,560,000 of deductions for 2026.
Does it fit?
Could fit when
- The business makes a profit and plans to buy equipment or other property
Unlikely to fit when
- The business is not making a profit, so there is little tax to reduce
- You need the cash before you buy, not after
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative, Nonprofit
- Usually needs a profitable business
- Taxable income (or for the health care credit, tax-exempt status with payroll) for the relief to bring a benefit
- Section 179 and bonus depreciation: property you own and use in the business
- Health care credit: fewer than 25 full-time equivalent employees, coverage through the SHOP Marketplace
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all grants, tax credits and prizes
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- Tax treatment checked
- Records of what you bought
- Tax returns
Regulation and protections
Regulators: Internal Revenue Service (IRS).
Who runs it: Federal program.
The Internal Revenue Code and IRS guidance set what qualifies and how much you can claim. Claims can be checked in an IRS audit, so keep records.
Rules that differ by state
- California: California's California Competes Tax Credit is an income tax credit for businesses that want to locate or grow in California, with over $180 million available each year, awarded competitively on 14 factors including full-time jobs created and investment. For 2026 to 2027, applications are taken from January 4 to 25 and March 1 to 15, 2027. (California GO-Biz: California Competes Tax Credit)
Types of provider: The IRS, through your tax return; State tax agencies and economic development offices, for state credits.
Also consider
What has changed
No changes since this page was published. It was last checked against its sources on October 20, 2026.
Sources
- IRS Publication 946: How To Depreciate Property (section 179 limits for 2026, special depreciation under P.L. 119-21) · checked October 20, 2026
- IRS: Small Business Health Care Tax Credit and the SHOP Marketplace · checked October 20, 2026
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