Maximizing Business Tax Savings: Your Guide to Section 179 in 2025
Navigating Section 179: Tax Savings for Your Business in 2025
As 2025 approaches, businesses have new opportunities to maximize their tax savings through Section 179 of the Internal Revenue Code. If you’re looking to invest in equipment, software, or other qualifying assets, now is the time to familiarize yourself with the upcoming changes. At Navigation Financial Services, we’re here to help you make informed decisions to grow your business while optimizing your financial strategy.
What Is Section 179?
Section 179 allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. Instead of spreading deductions over several years, businesses can immediately reduce their taxable income, freeing up capital to reinvest in growth.
Key Updates for 2025
Increased Deduction Limit: For tax years beginning in 2025, the maximum deduction will rise to $1,250,000 (up from $1,220,000 in 2024).
Higher Phase-Out Threshold: Businesses can deduct the full amount until total equipment purchases exceed $3,130,000 (up from $3,050,000 in 2024). Beyond this threshold, deductions are reduced dollar-for-dollar.
SUV Deduction Limit: The maximum deduction for qualifying heavy SUVs will increase to $31,300 (from $30,500).
Bonus Depreciation Reduction: Bonus depreciation, often used alongside Section 179, will drop from 80% to 60% in 2025, phasing out entirely by 2028.
These updates highlight the importance of planning equipment purchases strategically to maximize benefits.
How Section 179 Works: Two Easy-to-Understand Examples
Example 1: Expanding a Construction Business
Imagine Sarah owns a small construction company. She needs to purchase a new excavator and software to manage her growing team. Here’s how Section 179 and bonus depreciation can benefit her in 2025:
Cost of Excavator: $100,000
Cost of Software: $10,000
Total Investment: $110,000
Under Section 179, Sarah can deduct the full $110,000. However, if her purchases exceeded the Section 179 limit or she wanted additional savings, she could apply bonus depreciation at 60% for qualifying amounts not covered by Section 179. In this case, since her investment is within the Section 179 limit, she deducts the entire $110,000, saving $27,500 at a 25% tax rate.
Example 2: Upgrading Office Technology
David runs a marketing agency and plans to upgrade his office with new computers, printers, and project management software. Let’s say his investment exceeds the Section 179 limit. Here’s how it works:
Cost of Equipment: $1,300,000
Section 179 Deduction: $1,250,000 (maximum for 2025)
Remaining Amount for Bonus Depreciation: $50,000
David applies bonus depreciation at 60% for the remaining $50,000, which provides an additional $30,000 deduction. His total deduction is $1,280,000 ($1,250,000 + $30,000). With a 22% tax rate, he saves $281,600 in taxes, helping offset the cost of his investment.
Why Act Now?
While Section 179 is a powerful tax-saving tool, the decreasing bonus depreciation rates make early planning essential. By taking advantage of the higher deduction limits in 2025, businesses can offset the impact of the reduced bonus depreciation and optimize their financial outcomes.
How Navigation Financial Services Can Help
At Navigation Financial Services, we specialize in helping businesses access financing solutions tailored to their needs. Whether you’re acquiring equipment or exploring working capital options, our team is here to guide you through the process, ensuring you’re positioned for success.
Contact us today to learn how we can support your business growth while leveraging Section 179 and other financial strategies to your advantage.
Invest wisely, save significantly, and position your business for success in 2025!