For contractors considering a major equipment purchase before the end of the year, 2026 offers expanded opportunities to deduct qualifying business equipment sooner rather than depreciating the entire cost over several years.

Section 179 is still one of the most useful tax provisions for businesses investing in equipment, but it is no longer the only year-end incentive contractors should be looking at.

For 2026, the Section 179 deduction limit has increased to $2,560,000, while 100% bonus depreciation is also available for many qualifying equipment purchases. Together, these provisions can make larger investments in construction equipment particularly important to discuss with your tax professional before year-end.

If you're planning to replace aging equipment, expand a crew, or invest in larger machines for upcoming work, here's what to know.

This article is general information, not tax advice.

Section 179 allows a business to elect to deduct some or all of the cost of qualifying business property in the year it is placed in service rather than recovering that cost entirely through depreciation over future years.

For tax years beginning in 2026, the maximum Section 179 deduction is $2,560,000.

The deduction begins to phase out once a business places more than $4,090,000 of qualifying Section 179 property in service during the year.

For contractors, qualifying property can include many types of tangible machinery and equipment purchased for use in the business. Section 179 generally requires the property to be acquired by purchase and used more than 50% for business. The deduction is also subject to a business-income limitation.

That means Section 179 remains extremely useful, but the actual deduction available to a business depends on more than simply the purchase price.

The Section 179 limits increased slightly from 2025, but the larger story is the availability of 100% bonus depreciation. 100% bonus depreciation has been restored on a permanent basis under current law for qualifying property acquired after January 19, 2025. Eligible property generally includes tangible MACRS property with a recovery period of 20 years or less, which covers many types of business machinery and equipment. Certain used property can qualify as well.

For contractors making substantial equipment investments, that creates considerably more flexibility than looking at Section 179 alone.

These are federal rules. Many states treat Section 179 and bonus depreciation differently, so state tax results may not match.

The two deductions accomplish similar things, but they are not identical.

Section 179 allows businesses to choose how much eligible cost to expense and which qualifying assets to apply the election to. However, it has annual dollar limits, begins phasing out when total qualifying purchases become large enough, and is limited by taxable income from the active conduct of a trade or business.

Bonus depreciation works differently. For qualifying property, the current additional first-year depreciation percentage is 100%. The IRS requires any allowable Section 179 deduction to be applied first, with bonus depreciation then calculated on the remaining qualifying basis.

For some businesses, that means the two provisions can work together rather than requiring a choice between them.

This is where the 2026 rules become especially relevant to construction companies.

In a simplified hypothetical, a business that places $3 million of qualifying equipment in service in 2026, has enough business income to use the full Section 179 amount, and meets all other requirements could potentially elect $2,560,000 under Section 179 and apply 100% bonus depreciation to the remaining $440,000. Actual results vary widely, and many businesses will not be in this position.

That is an important distinction from simply saying, "Section 179 lets you write off equipment."

For contractors investing in multiple machines, larger equipment packages, or higher-dollar equipment, bonus depreciation may remain available even when Section 179 alone doesn't cover the entire investment.

Many common pieces of construction equipment may fall within the types of depreciable tangible property eligible for Section 179, bonus depreciation, or both, depending on how they are purchased and used.

• Ride-on and walk-behind power trowels
• Concrete saws and early-entry saws
• Plate compactors and reversible compactors
• Rammers and rollers
• Concrete and mortar mixers
• Dewatering pumps
• Generators and jobsite power equipment
• Surface grinders and floor preparation equipment
• Dust extractors and vacuum systems
• Core drills and cutting equipment
• Laser and layout equipment
• Other qualifying machinery and jobsite equipment

Both new equipment and certain qualifying used equipment may be eligible.

The important point is that tax treatment depends on the actual property, ownership structure, business use, and taxpayer, so contractors should confirm eligibility with their accountant rather than assuming every purchase receives the same treatment.

For depreciation purposes, the IRS generally considers property placed in service when it is ready and available for its specific business use. Simply paying for or ordering equipment before December 31 does not necessarily mean it has been placed in service.

For a calendar-year business trying to claim a 2026 deduction, equipment therefore generally needs to be ready and available for business use by the end of 2026.

For example, if a machine is delivered in December but requires installation or preparation and isn't operational until January, the IRS's guidance indicates it may not be considered placed in service until the following year.

That's why waiting until the final days of December can create problems with large equipment purchases.

Freight availability, dealer inventory, setup, inspection, and installation can all affect when the machine is actually ready to work.

It's also important to understand what these incentives actually do.

If a contractor purchases $100,000 of qualifying equipment and receives a $100,000 first-year deduction, that does not mean the government reimburses the $100,000 purchase.

It means the deduction can reduce the income subject to tax.

The actual tax savings depend on factors such as the business's taxable income, entity structure, applicable tax rates, other deductions, and the way Section 179 and depreciation rules apply.

That's why equipment decisions should still start with whether the machine makes sense for the business.

A tax deduction can improve the economics of a needed purchase, but it shouldn't turn unnecessary equipment into a good investment.

For contractors already considering equipment, the year-end tax rules may affect the timing of purchases.

1. Replacing Equipment That's Costing You Money
If an aging saw, compactor, pump, mixer, trowel, or generator is creating downtime and repair costs, some contractors review with their accountant whether replacing it before year-end makes sense for their situation.

2. Moving Into Larger Equipment
The expanded Section 179 limits and 100% bonus depreciation can also be relevant for contractors moving into more productive equipment.

That might mean stepping from a forward plate into heavier compaction equipment, adding a ride-on trowel, purchasing a larger saw, expanding a pump fleet, or investing in equipment that allows a crew to handle larger projects.

The higher the equipment investment becomes, the more important it is to understand how Section 179 and bonus depreciation may work together.

3. Adding Equipment for Another Crew
Growing contractors often reach a point where one piece of equipment is shared across too many jobs.

Adding a second saw, mixer, compactor, pump, trowel, or generator can reduce scheduling conflicts and support another crew. When that purchase already makes operational sense, year-end tax planning may influence whether it is purchased in December or delayed until the following year.

Before making a large year-end purchase, confirm a few things with your accountant and equipment supplier.

First, make sure the property actually qualifies and that your planned business use meets the applicable requirements. Section 179 generally requires more than 50% business use, and special rules apply to vehicles and certain other property. 

Next, determine whether Section 179, bonus depreciation, regular depreciation, or some combination makes the most sense for your business. Taking the largest possible deduction immediately isn't necessarily the best tax strategy in every situation.

And don't overlook availability. If qualifying equipment must be placed in service during 2026, ordering something that won't arrive or be ready until January can change which tax year receives the deduction. 

For years, Section 179 has been the tax incentive contractors hear about most often when equipment season rolls around. 

But for 2026, contractors considering equipment purchases should also understand 100% bonus depreciation.

With a Section 179 deduction limit of $2.56 million, a $4.09 million phase-out threshold, and 100% bonus depreciation available for many qualifying purchases, businesses making significant equipment investments have more first-year deduction options to discuss with their tax professionals.

If you've already been planning to replace equipment, add capacity, or prepare for larger projects in 2027, it may be worth reviewing those purchases before the end of the year.

CMU Supply carries professional construction equipment from manufacturers including Multiquip, Husqvarna, Allen Engineering, Imer, and other leading brands. If you're planning a year-end purchase, our team can help you compare equipment and check availability so you're not trying to track down the right machine at the end of December.

This article is for general informational purposes and is not tax, accounting, or legal advice. Tax eligibility depends on your individual business circumstances. Consult a qualified tax professional before making tax-related purchasing decisions.