A popular tax rule that incentivizes businesses to invest in equipment has been extended this year, giving landscape companies and other business owners a powerful tool to consider as they begin assessing their year-end financials.
The Section 179 Expense Deduction allows businesses to deduct the full cost of a piece of equipment immediately in its first year, as opposed to depreciating it little by little over the course of several years. Under the right circumstances, this accounting tactic can be beneficial for a landscaping company.
First of all, deducting the full cost reduces your taxable income more significantly that year. Below is an example.
Say you bought a few new zero-turn mowers at a cost of $40,000. By deducting the full $40,000 in one year, you avoid paying $14,000 in taxes that year (assuming a 35% tax rate). Alternatively, you would only end up saving $2,000 on your tax bill in that first year if you used the 7-year MACRS depreciation formula that’s standard for mowers.
As you can see, Section 179 helps you save a lot more money upfront. It’s also possible that using Section 179 could end up bumping you down a tax bracket that year. Not only would you avoid paying taxes on the dollar amount you’re claiming for Section 179, but your remaining net income would be taxed at a rate that’s several percentage points lower. That’s more savings to either put in your pocket or reinvest in your business! Below is an example:
Let's say you're a sole proprietorship, you file taxes as “married filing jointly,” and you are expecting your taxable income to be just over $400,000 in 2025, which puts you in the 32% tax bracket. If you could lower your taxable income by $6,000 (or more), you could move down to the 24% bracket. So, you decide to purchase a new mower for $15,000 before the end of the year and deduct the entire purchase using Section 179, bringing your taxable income down to approximately $385,000. Making this move would not only get you a new mower for the upcoming mowing season, but also save you $4,000 in taxes.
Thanks to Section 179, many companies like to make late-season equipment purchases once they have a handle on how much net income they’re going to make that year. If you had a really good year, it might make sense to use some of those profits to proactively replace an older or troublesome piece of equipment, rather than just paying more in income taxes.
Not at all. There are downsides to frontloading the entire cost of new equipment in one year. First and foremost, you won’t have anything to deduct in future years. That’s going to make it more difficult to reduce your taxable income in those years – especially if you have some strong growth years. If you find yourself creeping up into a higher tax bracket, you could get hit even harder.
Determining if you should use Section 179 must be based on a combination of things:
Like anything tax-related, Section 179 requires thoughtful consideration. You should always consult with your accountant regarding what makes the most sense for your company.
Businesses of all sizes and industries can take advantage of Section 179, but there are clear guidelines. The equipment must be primarily used for business purposes, which equates to at least 50% of its use. When that’s the case, Section 179 can be claimed for not only lawn equipment, but also things like trucks and trailers, computers and software, office furniture, shop equipment, and even certain property improvements such as roofs, HVAC systems, security systems, etc.
Section 179 can be claimed for either new or used equipment purchases, equipment purchased with a loan, and even leased equipment if certain lease types are used. Your accountant can help you work through the finer details of making sure everything is compliant and reported correctly.
Even though Section 179 has recently been expanded under the One Big Beautiful Bill Act (OBBBA), there are still limitations. A company’s deduction limit is $2.5 million. For the typical landscape company, that far exceeds anything that would ever be needed anyway. You could outfit another 15 to 20 maintenance crews for $2.5 million.
If you happen to be a massive company that spends more than $2.5 million on equipment in a given year, there is another tax rule you can use to your advantage. It’s called Bonus Depreciation. Below is an example of how you could use it.
Say you want to use Section 179 to deduct $2.8 million in equipment purchases this year. That’s $300,000 over the limit. But now, since the OBBBA has increased Bonus Depreciation to 100%, you can write off that $300,000 all at once.
No, some states do not fully conform with Section 179 as written by the federal government. For instance, some may have different deduction limits or definitions of which types of property qualify. Work with your accountant to make sure you’re filing your state taxes correctly.
The same “depreciation recapture” rules apply as if you’d used the MACRS formula to depreciate the equipment over seven years. Below is an example of how it could play out.
Say you bought a mower for $15,000 and deducted all of that through Section 179. The “adjusted basis” immediately goes to $0. If you sell that mower for $14,000 a year later, you have to report that $14,000 through IRS Form 4797. That $14,000 is taxed like any other income. However, let’s say the used equipment market is hot and you sell that mower for $16,000 a year later. The first $15,000 is taxed as income, and the extra $1,000 is taxed as a capital gain.
Always consult your accountant to understand how all of these different tax rules work together, which will help ensure that you’re making the smartest decisions on behalf of your business. At the end of the day, one of the smartest decisions you can make is to invest in the best equipment at the most opportune times, which helps position your company for long-term success and profitability. Section 179 can be a great tool to help you do that.