Big Purchases: Should You Buy at Year-End? Section 179 Explained

Every year as December approaches, business owners, creators, doctors, online sellers, and high-income professionals ask the same question:

“Should I make big purchases before year-end to reduce my taxes?”

The answer often depends on Section 179, one of the most powerful tax tools available to small businesses. But Section 179 does NOT apply equally for federal and California taxes, and many taxpayers misunderstand what qualifies, how much they can deduct, or when the deduction makes sense.

In this article, we break down Section 179 in plain English, explain its benefits and limitations, and show real examples of how our clients at Velin & Associates use it to save thousands—sometimes tens of thousands—at year-end.

What Is Section 179?

Section 179 allows businesses to fully deduct the cost of qualifying equipment and certain software in the year it is purchased and placed into service, instead of depreciating it over several years.

In simple terms:

👉 You buy equipment → You can deduct the full amount this year → You lower your taxable income right away

For many small businesses, this is one of the most valuable year-end planning tools.

2025 Federal Section 179 Limits

For the 2025 tax year (federal):

• Maximum Section 179 deduction: Over $1,000,000+
• Phase-out begins: At $2.7M+ in purchases
• 100% bonus depreciation: Also available (but separate from 179)

Important:
California does not conform to federal Section 179 limits. California’s limits are much lower, meaning you may deduct the full amount federally but only a fraction on your CA return.

This makes planning extremely important for creators, doctors, and online sellers based in California.

What Qualifies for Section 179?

Common qualifying purchases:

✔ Cameras, production equipment, lighting
✔ Computers, laptops, and editing workstations
✔ Office furniture
✔ Medical and dental equipment
✔ Machinery and tools
✔ Vehicles over 6,000 lbs (with rules)
✔ Software used in business
✔ Certain building improvements (with restrictions)

Real-World Examples from Velin & Associates Clients

Here are practical scenarios showing how Section 179 impacts real taxpayers.

YouTuber Upgrading Studio Equipment

A YouTuber purchases:

• $4,500 camera
• $3,000 lighting setup
• $2,000 editing laptop

Total: $9,500

Under Section 179:

👉 You can deduct the entire $9,500 in 2025 if purchased and placed into service before December 31.

But here’s the catch:

• Federal: full $9,500 deduction
• California: may allow only a smaller Section 179 amount + regular depreciation

A strategically timed purchase reduces the creator’s overall tax bill substantially.

Shopify Store Buying New Inventory Management Hardware

A Shopify seller buys $12,000 in barcode scanners, printers, and packing equipment for their warehouse.

Federal:

👉 Eligible for immediate Section 179 deduction
👉 Bonus depreciation may apply to certain items

California:

❌ Does NOT follow federal Section 179 limits
❌ No bonus depreciation

Result:
We help the business plan for the difference in federal vs. CA deductions so cash flow isn’t impacted unexpectedly.

Dentist or Medical Office Buying New Equipment

A dental practice buys:

• $30,000 panoramic X-ray machine
• $14,000 sterilization equipment

Section 179 allows the practice to deduct most or all of these federally.

This reduces income by $44,000—a major year-end tax strategy for high-earning medical and dental businesses.

Again, California allows much smaller deductions—but careful planning prevents surprises.

Amazon Seller Upgrading Warehouse Equipment

An Amazon FBA business buys:

• $18,000 shipping station setup
• $9,000 storage racks
• $7,000 industrial label printer system

Total: $34,000

Federal Section 179 applies to almost everything.
But California differences must be accounted for to avoid underpayment.

High Net Worth Individual Buying Heavy Vehicle for Business Use

A real estate investor or high-income entrepreneur purchases an SUV over 6,000 lbs for business.

Federal rules may allow a large deduction under:

• Section 179
• Bonus depreciation
• Standard vehicle depreciation rules

California places strict limits, so we calculate:

✔ federal deduction
✔ California add-back
✔ impact on self-employment tax
✔ impact on future deductions

Should You Buy Big Equipment at Year-End?

Here are the questions we ask clients before recommending a purchase.

1. Do you need the equipment for business?

IRS rules require:

• Ordinary
• Necessary
• Used >50% for business

If it’s not truly needed, the deduction isn’t worth it.

2. Do you have enough taxable income to benefit?

Section 179 cannot create or increase a loss.

If income is too low this year:

👉 We may recommend waiting until next year
👉 Or using bonus depreciation instead (federal only)

3. Will you regret spending the cash?

A tax deduction never means the purchase is “free.”
If cash flow is tight, we may not recommend year-end buying.

4. How does California treat the deduction?

This is extremely important.

California limits often mean:

• A big federal deduction now
• A smaller CA deduction spread over years

This affects:

• Estimated taxes
• Cash flow
• Tax projections
• Multi-year planning

Section 179 vs. Bonus Depreciation: Which Should You Use?

Federal allows both.
California allows neither in full.

General guidelines:

• Section 179 is best for smaller purchases
• Bonus depreciation is better for large purchases
• A mix can create the optimal deduction strategy

We run the numbers for each client.

Year-End Planning Tip

If you want a deduction for 2025:

👉 The equipment must be purchased AND placed into service by December 31.

“Placed into service” means:

• Delivered
• Setup
• Ready for business use

Not just ordered.

If You’re Thinking About Year-End Purchases, Talk to Us First

Section 179 is powerful—but when misused, it can create:

❌ California tax surprises
❌ Lost deductions
❌ Higher estimated tax payments
❌ Cash flow problems
❌ Poor long-term planning

At Velin & Associates, we help creators, doctors, online sellers, and high-income professionals make the right year-end decisions—not expensive mistakes.

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

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