Buying Equipment Before Year-End: Section 179 Explained

Every December, freelancers hear that they should "buy something for the business" before the year ends. Sometimes that is good advice. A camera, a laptop or a new desk you were going to buy in January anyway can lower this year's tax if it is in use by Dec. 31. The tool that makes that possible is Section 179 of the tax code, along with two close relatives. This guide explains how they work, what the timing rules are and what a December purchase is actually worth.

Depreciation, and the three ways around it

Business equipment that lasts more than a year is normally depreciated: you deduct its cost a piece at a time over its recovery period, which is five years for computers and cameras and seven for office furniture. Three provisions let you skip most or all of that wait.

	De minimis safe harbor	Section 179	100% bonus depreciation
What it covers	Items costing $2,500 or less per item or invoice	Equipment, software and some vehicles, up to $2.56 million in 2026	Most new or used equipment acquired after Jan. 19, 2025
How you claim it	An election statement with your return; deducted as an expense	Form 4562, Part I	Form 4562, automatic unless you elect out
Limited to business income?	No	Yes; the excess carries forward	No; it can create a loss
Pick and choose by item?	Applies to all qualifying items that year	Yes, any amount on any asset	Election out is by class of property

For most freelancers the choice is less dramatic than it looks. All three can turn a $3,000 purchase into a $3,000 deduction this year. The differences show up when profit is low, when a vehicle is involved or when you want to spread the deduction on purpose.

Placed in service means ready to use

The deduction belongs to the year the asset is placed in service: delivered, set up and available for business use. A camera ordered Dec. 28 that arrives Jan. 4 is a 2027 deduction. If you are buying late in the year, have it shipped early enough to unbox it before the holiday week.

Business use has to be more than half

For computers, cameras, vehicles and other property you might also use personally, Section 179 requires business use above 50%, and the deduction is limited to the business share. A laptop used 70% for work and 30% for streaming gets a 70% deduction. If business use later drops to 50% or below, part of the deduction is recaptured as income.

Priya's December: what the timing is worth

The mid-quarter convention is worth knowing. If you place more than 40% of a year's depreciable property in service in October through December, regular depreciation gives you only a sliver in year one: 5% of the cost for five-year property and 3.57% for seven-year property. Expensing sidesteps that entirely, which is part of why December purchases are almost always expensed.

Priya's $8,100 saved $1,778, or about 22 cents per dollar spent, because the deduction lowers both her self-employment tax and her income tax. That is a real saving on equipment she needed. It is a 78-cent loss on equipment she did not.

When Section 179 is the wrong tool

Two effects people miss

Expensing lowers self-employment tax too

Section 179 and bonus depreciation reduce Schedule C profit, so they lower self-employment tax as well as income tax. That is the main reason the saving is larger than your bracket alone would suggest. It also means a big expense in one year lowers the earnings that count toward your Social Security record for that year, a small cost that is rarely worth worrying about.

Selling the gear later can bring some of it back

When you expense a $4,800 camera, its tax basis drops to zero. If you sell it two years later for $2,000, that $2,000 is taxed as ordinary income (depreciation recapture), though not self-employment tax. Expensing still usually wins, because you got the deduction early and the recapture is limited to what you sell it for. Keep the purchase invoice with your tax records until you dispose of the item.

Software and subscriptions are different

Off-the-shelf software you buy outright qualifies for Section 179. Monthly or annual subscriptions, such as editing suites or cloud storage, are ordinary business expenses deducted as you pay them. Prepaying a 12-month subscription in December is generally deductible this year if the term ends within 12 months, which is a smaller version of the same timing move.

What qualifies, and what does not

Section 179 and bonus depreciation cover tangible business property and off-the-shelf software: computers, monitors, cameras, lenses, audio gear, tools, furniture, printers and machinery. New and used both count, as long as the used item is new to you and was not bought from a related party.

They do not cover land, buildings you rent out, property used mostly for personal purposes or ordinary supplies (which you deduct as expenses anyway). Many states do not follow the federal bonus depreciation rules, so your state return may spread the deduction even if your federal return does not.

A year-end equipment checklist

1. List what the business will need in the next six months. Pull forward only items on that list.
2. Order early enough that everything is delivered and set up by Dec. 31.
3. Keep the invoice and note the date you started using each item.
4. Record the business-use percentage for anything you might also use personally.
5. Check your expected profit. If it is low, ask whether depreciation over several years would save more.
6. Update your fourth-quarter estimate on the quarterly tax calculator so a lower bill shows up in the Jan. 15 payment.

Equipment is one of several moves on the year-end list. The guide on starting year-end tax planning in October covers income timing and retirement contributions, and photographers and designers will find gear-specific examples on the photographer and graphic designer pages.

This article is for educational purposes only and is not tax or legal advice.