Your Guide to Year-End Tax Benefits on 2025 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 a large percentage of qualifying equipment 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.

Several major updates to the Section 179 deduction and bonus depreciation became effective earlier this year following the passage of the One Big Beautiful Bill Act (OBBBA) in July 2025.

Section 179 Highlights for 2025 Include:

• The maximum amount that can be deducted is now $2.5 million.
• The deduction begins to phase out only when total equipment purchases for the year exceed $4 million. The deduction is fully phased out when total purchases reach $6.5 million.
• Businesses can use the deduction for both new and used equipment, provided it is new to your business and used more than 50% for business purposes.
• Keep in mind, Section 179 cannot result in a net loss. And businesses with a net loss are still qualified to deduct the cost of new equipment and carry-forward the loss.

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

Section 168(k) allows for bonus depreciation on eligible equipment and property, thus allowing accelerated depreciation for a reduced tax burden, similar to the Section 179 deduction. A company can take both Section 179 and bonus depreciation allowances, but Section 179 must be applied first. Therefore, any qualified property purchased over the $2.5 million limit may then be taken in bonus depreciation. So it’s great for businesses that spend more than the Section 179 spending limit.

Section 168(k) Bonus Depreciation Highlights for 2025 Include:

• The law has reinstated a 100% bonus depreciation rate, which was previously scheduled to phase down to 40% in 2025. This rate is now permanent for qualifying assets acquired and placed in service after January 19, 2025. Qualifying assets acquired between January 1, 2025, and January 19, 2025, are still eligible for the 40% bonus depreciation rate.
• Unlike Section 179, there’s no dollar limit on bonus depreciation. It can be applied to the cost of qualifying assets after the Section 179 limit has been reached.

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 an enhanced first-year tax write-off for new machinery and equipment. The 100% immediate expensing incentive has expired for 2025. However, businesses can still benefit from the Accelerated Investment Incentive rules.

For example, if a business purchases new equipment for $100,000 classified under Class 38 (which includes most power-operated movable equipment used for excavating, moving or compacting), they would normally be eligible for a 30% write-off. Under the current Accelerated Investment Incentive rules, the business can claim an enhanced first-year tax depreciation.

Here’s how that would break down:

• Purchase Price: $100,000
• Normal CCA Rate: 30%
• Half-Year Rule Application: The first-year rate is reduced to half of the normal rate, so 15%.
• Accelerated CCA: The first-year deduction is calculated as 1.5 times the half-year rate, applied to the purchase amount.
• First-Year Tax Deduction: $100,000 x (15% x 1.5) = $22,500

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 finance or lease a new machine, check out our complete product lineup here in North America featuring a broad range of financial offers. Remember, to take advantage of Section 179 and bonus depreciation in the U.S. this year, your equipment must be purchased and put into service between January 19, 2025, and midnight on December 31, 2025.

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.