Your Guide to Year-End Tax Benefits on 2026 Heavy Equipment Purchases

Let’s start with the U.S. Section 179 of the IRS Tax Code, which offers eligible businesses a great opportunity to maximize purchasing power. Most of the new and used (must be new to you) equipment your business will purchase or finance will qualify for the Section 179 deduction. It allows you to deduct 100% of eligible equipment costs in the year it was put into service. This creates a larger initial expense deduction than using a standard depreciation method, thus reducing your tax burden. 

Section 179 highlights for 2026 include: 

• Higher deduction limit: The maximum first-year deduction has increased to $2,560,000, giving businesses more upfront tax relief on equipment purchases. 
• Updated phase-out threshold: The deduction begins phasing out dollar-for-dollar once total qualifying equipment purchases exceed $4,090,000, with full elimination at $6,650,000. 
• Full expensing for small-to-midsize fleets: Contractors spending up to $4.09 million on qualifying heavy machinery (e.g. excavators, wheel loaders and haulers) can deduct 100% of purchase costs up to the $2.56M cap. 
• New and used equipment qualifies: Equipment doesn’t need to be brand-new to qualify, it just needs to be new to you and used for business operations more than 50% of the time. 
• Net income limits: Section 179 cannot create a net operating loss. However, if your business has a net loss, you can still claim the deduction and carry forward the unused amount to offset future tax years. 

You should always verify the current IRS guidelines, as these limits adjust annually for inflation.

Beyond Section 179, you also have Section 168(k), or Bonus Depreciation, in your tax toolkit. You can actually use both write-offs in the same tax year, but you have to apply Section 179 first. If your total equipment purchases cross the $2.56 million Section 179 cap, Bonus Depreciation picks up where Section 179 leaves off. It’s a huge win if you’re making large, multi-machine investments in 2026. 

Section 168(k) Bonus Depreciation highlights for 2026 include: 

• 100% first-year deduction restored: Bonus depreciation is permanently set at 100% for qualifying equipment placed in service in 2026. 
• No spending caps: Unlike Section 179, there’s no dollar limit or phase-out threshold on bonus depreciation. 
• New and used equipment: Bonus depreciation applies to both new and used equipment (as long as it’s new to you).

Let’s look at the tax savings introduced by bonus depreciation, along with Section 179.

Before you take Section 179 and/or bonus depreciation deductions, consult with your tax or legal advisor.

Heavy Equipment Tax Incentives in Canada

In Canada, the Capital Cost Allowance (CCA) provides accelerated tax write-offs for qualifying heavy machinery and equipment. Under the reinstated Reaccelerated Investment Incentive (RII) rules, businesses acquiring equipment in 2026 can claim an enhanced first-year CCA deduction, effectively tripling the standard first-year write-off. 

For example, if a contractor purchases $100,000 in new or used equipment classified under Class 38 (excavators, wheel loaders, haulers, etc. with a standard 30% CCA rate): 

• Purchase price: $100,000 
• Standard Class 38 rate: 30% 
• Standard first-year rate (Half-Year Rule): 15% 
• Reaccelerated CCA rate: 3× the half-year rate (45%) 
• First-year tax deduction: $100,000 × 45% = $45,000 

Additionally, there may be further incentives available for zero-emission equipment — your Volvo dealer is a great first step to helping you find valuable incentives for electric heavy equipment.

Now’s a great time to take advantage of these tax incentives.

If you’re looking to purchase, finance or lease a new machine, check out our complete product lineup in North America featuring a broad range of flexible financial options. Remember, to take advantage of Section 179 and Bonus Depreciation in the U.S. this year, your equipment must be acquired and placed in service between January 1, 2026, and midnight on December 31, 2026. 

If you have additional questions about the advantages of Section 179 and bonus deprecation, check out these FAQs or talk to your local tax advisor.

Disclaimer: U.S. and Canadian tax incentives are complicated. There are many limits, exclusions and special rules for different types of businesses in each country. The information in this article, and on this site, is not and should not be construed as tax or legal advice. Each business situation is different and tax regulations change frequently. We strongly recommend that you consult with your tax advisor regarding how these tax-saving opportunities apply in your situation.