Understanding Section 179 and Section 168: A Simple Guide for Business Owners

When you run a business, investing in new equipment can be a big decision. The cost of advanced machines like automated finishing systems from Superfici America can add up quickly. But the U.S. tax code includes special rules designed to help business owners manage these costs. Two of the most helpful are Section 179 and Section 168.

These parts of the tax code may sound complicated, but they both deal with how you can deduct the cost of equipment used in your business. In other words, they help you save money on taxes when you buy things that help your company grow.

Understanding how each one works and when you can use them, can make a big difference in your bottom line.

 

A Quick Overview of Depreciation and Expensing

When a business buys equipment, the IRS doesn’t always allow you to deduct the full cost right away. Normally, you must “depreciate” it spreading the deduction over several years based on how long the item is expected to last. This is the rule under Section 168, known as the Modified Accelerated Cost Recovery System (MACRS).

But sometimes, the government lets you expense equipment meaning you can write off some or all of the cost immediately. This faster deduction can free up cash for your business sooner rather than later. That’s where Section 179 and Section 168(k) (often called bonus depreciation) come in.

What Is Section 179?

Section 179 is like a fast-track way to deduct the cost of business equipment in the same year you start using it. In 2025, businesses can typically deduct up to around $1.25 million in qualifying equipment, with the amount gradually reducing after total equipment purchases exceed roughly $3 million in a year.

Key Rules

• You can include new or used equipment (like automated finishing systems).

• The deduction can’t exceed your business income for the year meaning if your business has a loss, you can’t use Section 179 to create or increase that loss. (But you can carry forward unused amounts to future profitable years.)

• It’s meant mostly for small and medium-sized businesses because the deduction phases out for larger investments.

What Is Section 168?

Section 168(k), often called bonus depreciation, works differently. It lets you deduct a large portion of the cost of certain new (and sometimes used) assets even if your business isn’t making a profit that year.

In 2025, the bonus depreciation rate is 40%, and it’s scheduled to phase out after 2026 unless Congress extends it. Under Section 168, you can:

• Deduct a percentage of the cost immediately.

• Depreciate the rest over several years under normal IRS schedules.

• Use it even if your business is operating at a loss, because the deduction can increase your net operating loss (NOL), which you can carry forward to reduce future taxable income.

That last point is a major difference from Section 179: bonus depreciation isn’t limited by your taxable income. So, even if your company didn’t turn a profit, you could still claim it.

  

Comparing Section 179 and Section 168

Feature	Section 179	Section 168
Deduction limit	Up to $1.25 million (approx.) in 2025	No dollar limit
Eligible property	New or used business equipment	Mainly new equipment (some used)
Income limit	Can’t exceed business income	Can be used even with a loss
Who benefits most	Small & midsize businesses	Medium & large businesses
How applied	Deduct full cost (up to limit) in the first year	Deduct a percentage (e.g., 40%) in year one; depreciate the rest
Phases out	After about $3 million in purchases	Scheduled to end after 2026

Why These Rules Matter for Equipment Buyers

For a business considering equipment purchases like automated finishing systems from Superfici America, these deductions can make a big difference.

• Cash Flow Boost:

Deducting equipment costs sooner means less money paid in taxes now, freeing up cash for payroll, materials, or marketing.

• Flexible Planning: 

Businesses having a profitable year might choose Section 179 to offset income immediately. Those facing a temporary loss might prefer Section 168, since it can still create a future tax benefit.

• Combined Benefits:

You can often use both applying Section 179 first (up to the limit) and then Section 168 on the remaining cost.

Example: How It Works

Let’s say your business buys a Superfici America automated finishing line for $500,000 in 2025.

• With Section 179, you could deduct up to $500,000 in 2025 (if you have enough income).

• If your business had little or no income that year, you could instead use Section 168, taking a 40% deduction ($200,000) and depreciating the rest in future years. Even if your business runs at a loss, this deduction can be carried forward to reduce future taxes.

Either way, you get to lower the overall cost of your investment.

How This Supports Growth and Automation

The IRS designed these rules to encourage business investment. By lowering the “after-tax” cost of buying machinery, Section 179 and 168 make it easier for companies to modernize especially in industries where automation improves productivity and product quality.

Superfici America’s finishing systems fit squarely within the kinds of assets Congress had in mind when creating these incentives: machinery that increases efficiency, supports domestic manufacturing, and helps businesses stay competitive.

Pro Tips for Business Owners

• Time your purchase wisely.

Having a strong year? Buy and install before year-end to lower this year’s tax bill.

• Financing counts too. 

You can still claim the full deduction even if you finance or lease the equipment.

• Ask Superfici for documentation.

A short note from them describing how your machine is used in your production line helps your accountant confirm it qualifies.

• Double-check state rules.

Not every state matches federal tax laws exactly, your CPA can help with that.

Final Thoughts

Both Section 179 and Section 168 offer valuable tools for business owners looking to invest in equipment. By using these tax benefits wisely, business owners can reduce costs, improve operations, and grow their companies with the help of advanced automated finishing solutions from Superfici America.

Note: This post is for educational purposes only and should not be considered tax or legal advice. Business owners should always consult a qualified tax professional before making financial decisions.