Tax deduction guide

Buying business equipment before December 31: what counts for 2026

Tax year 2026 · Updated October 16, 2026

When it counts

  • Ready to use by December 31. Publication 946 says property is placed in service when it is ready and available for a specific use, even if you are not using it yet. A machine that needs installation is placed in service when it is installed and working.
  • $2,500 or less per item or invoice. The de minimis safe harbor lets you deduct the item in the year you pay for it, if you treat it as an expense in your books. Delivery and setup on the same invoice count toward the $2,500. It goes on Schedule C, line 27b.
  • The safe harbor is an election, made with a statement on your timely filed return. It also expects an accounting procedure at the start of the year that treats small purchases as expenses, so if that is new to you, ask a tax professional.
  • More than $2,500. The cost is depreciated, over 5 years for a computer and 7 years for office furniture and many other kinds of equipment. Two options speed that up, and both go on Form 4562 and Schedule C, line 13.
  • Bonus depreciation. For equipment you acquired after January 19, 2025, it is 100% of the business share in the first year, unless you elect out. For equipment acquired before January 20, 2025 and placed in service in 2026, it is 20%, so keep the purchase date.
  • Section 179. You can elect to deduct the business share in the first year, up to the 2026 limit of $2,560,000, if business use is more than 50%. It cannot be more than your business income for the year, and any excess carries to next year. Bonus depreciation has no such limit.
  • Paying by credit card. Under the cash method you generally deduct an expense in the year you pay it. For gifts to charity (Publication 526) and medical costs (Publication 502), IRS publications count a card charge in the year you make it. Publication 334 does not say so for business purchases, so ask your tax professional about a large December card purchase.

When it doesn't

  • Ordered or paid, but not ready by December 31. A $4,000 computer charged to a card on December 28 and delivered on January 6 starts in 2027.
  • Personal items. Personal, living and family expenses are never business deductions, and neither is the personal share of a mixed-use item.
  • Something you already own. A personal laptop you move into the business in December is depreciated from the day you first use it for work, on the lower of what you paid and what it was worth then, with no safe harbor or Section 179.
  • Business use of 50% or less. Section 179 is not available, and for listed property, such as a car, bonus depreciation is not either. Cars have their own first-year caps, so see the car and mileage guide.
  • One purchase split into several invoices to get under $2,500. The regulation has an anti-abuse rule for it.

A worked example

You buy a computer setup for $4,000 and use it 90% for work. The business share is $3,600.00. The personal share, $400.00, is not deducted.

  • Ready to use on December 15, 2026: 100% bonus depreciation gives a first-year deduction of $3,600.00, on Form 4562 and Schedule C, line 13. Section 179 gives the same $3,600.00 here if your business income for the year is at least that much.
  • If you elect out of bonus depreciation and skip Section 179: the setup is depreciated over 5 years, and the first year of a December purchase is 5% when the mid-quarter convention applies. That is $180.00.
  • Delivered January 6, 2027: none of it counts for 2026, even if you charged it on December 28.

A $2,400 item that you use 90% for work is under the $2,500 limit. With the safe harbor election, $2,160.00 is deductible in the year you pay, on line 27b.

What records to keep

  • The invoice, with the date, price, what you bought and who sold it. A card statement shows you paid, but not that you incurred the cost.
  • The date it was delivered and ready to use. A dated note or photo helps.
  • A note of your business use each year. If you take Section 179 and business use later falls to 50% or less, part of the deduction is added back to your income.
  • Your elections, such as the safe harbor statement and Form 4562. Keep asset records until the period of limitations ends for the year you dispose of the item.

Common questions

Does it count for 2026 if I pay in December and it arrives in January?

For depreciation, Section 179 and bonus depreciation, no. They start when the item is placed in service, so it counts for 2027. Items under the $2,500 safe harbor are deducted in the year you pay, but a payment for something you do not have yet is a question for your tax professional. The simple plan is to have it ready to use by December 31.

How do I elect out of bonus depreciation?

You attach a statement to your timely filed return, including extensions, that names the election and the class of property. It covers all property in that class placed in service that year, and you cannot revoke it without IRS consent. The first year is small for a December purchase: 5% for 5-year property under the mid-quarter convention, which applies when more than 40% of the year's depreciable property is placed in service in the last three months. Otherwise the half-year rate is 20%. Ask a tax professional whether it suits your income now and later.

Is it smart to buy equipment just to lower my taxes?

No. You still pay the full price, and the deduction lowers your tax by only part of it. Buy what the business needs. If you were going to buy it anyway, the year it is ready to use decides the tax year.

Sources

Also cited by the WriteOff rules: 26 U.S.C. sections 167, 168(k), 179, 262 and 263, and Treas. Reg. section 1.263(a)-1(f).