Section 179 Limit 2027: $2,640,000, With a $4.23M Phase-Out Line

Anyone budgeting a 2027 equipment purchase around the Section 179 deduction is, in one respect, in an easier position than they might expect. The 2027 revenue procedure hasn’t been published yet, and won’t be for weeks. But the dollar figure at the center of the calculation — the maximum amount of equipment cost a business can write off immediately, instead of depreciating over years — is already knowable from data the Bureau of Labor Statistics has finished publishing. The short answer: the 2027 Section 179 dollar limitation projects to $2,640,000, up from $2,560,000 in 2026, and that figure holds regardless of one open question about a missing month of inflation data. The phase-out threshold above which that limit starts shrinking, and the separate cap on sport utility vehicles, are close enough to their own rounding lines that the same open question does move them — to $4,230,000 or $4,220,000, and to $33,100 or $33,000, respectively.

The statute and the rounding

Section 179 of the tax code lets a business expense the cost of qualifying property immediately, in the year it’s placed in service, instead of spreading the deduction across a depreciation schedule. 26 U.S.C. § 179(b) sets the mechanics. Paragraph (b)(1) fixes the dollar limitation itself. Paragraph (b)(2) is the phase-out: that dollar limitation “shall be reduced (but not below zero) by the amount by which the cost of section 179 property placed in service during such taxable year exceeds” a separate threshold — so every dollar of qualifying purchases above the threshold reduces the available deduction by a dollar, until the deduction disappears entirely. Paragraph (b)(3) adds a second constraint entirely independent of the phase-out: the deduction can’t exceed the taxable income the business derives from the active conduct of a trade or business. Any amount disallowed for that reason doesn’t vanish — it carries forward to later years. Paragraph (b)(5)(A) then sets a separate, much smaller cap specifically for a sport utility vehicle, as the statute defines that category generally, rather than the ordinary dollar limitation.

None of those numbers were static after 2025. Public Law 119-21, the 2025 tax law, rewrote section 179(b) through its own section 70306, raising the dollar limitation to $2,500,000 and the phase-out threshold to $4,000,000 for property placed in service in taxable years beginning after December 31, 2024. Paragraph (b)(6)(A) then indexes both of those figures for inflation, using the cost-of-living formula in section 1(f)(3), with calendar year 2024 as the base and the indexing beginning with taxable years starting after 2025 — which makes 2026 the first adjusted year and 2027 the second. The SUV cap in paragraph (b)(5)(A) is indexed the same way but off a different, older base: calendar year 2017. Paragraph (b)(6)(B) sets the rounding: any increase is rounded to the nearest multiple of $10,000, except for the SUV cap, where an increase rounds to the nearest multiple of $100.

Checking the method against 2026

That statutory language translates into a specific calculation: take the average of the chained CPI-U for all urban consumers over the twelve months ending August 31 of the prior year, compare it to the corresponding base-year average, and apply the resulting percentage increase to the dollar figure, rounding as the statute specifies. It’s the same cost-of-living formula this site’s 2027 IRS inflation adjustments tracker applies across the rest of the tax code, from bracket thresholds to retirement contribution limits.

Before trusting that formula for a year the IRS hasn’t confirmed, it’s worth running it against a year the IRS already has. Revenue Procedure 2025-32, section 4.24, set the confirmed 2026 figures: a $2,560,000 dollar limitation, a $4,090,000 phase-out threshold, and a $32,000 SUV cost cap. Running the identical mechanics — the 2026 twelve-month window average against the 2024 and 2017 base-year averages, with the same rounding rules — reproduces all three of those numbers exactly. That’s three for three, using the same 2026 window average of roughly 177.11 on the chained CPI-U index that reproduces the other confirmed 2026 figures elsewhere in the tax code. The same mechanism is doing the projecting below, not a different one built to fit a target.

Why October 2025 unsettles two figures but not the third

The complication sitting inside the 2027 window is a genuine one. The twelve-month period behind the 2027 figures runs from September 2025 through August 2026, and the Bureau of Labor Statistics never published a chained CPI-U reading for October 2025 — data collection for that report stopped during that year’s government shutdown. That leaves two ways to reconstruct the window: average the eleven months that were actually published, which comes out to roughly 182.86, or fill the gap with an imputed estimate for the missing month and average all twelve, which comes out lower, at roughly 182.63. The twelfth month either way, August 2026, was published by the Bureau of Labor Statistics on September 11, 2026, at 185.739, so the input data is otherwise complete.

Applied to the $2,500,000 dollar limitation, both paths land in the same place. The eleven-month average produces an unrounded figure near $2,642,193; the imputed twelve-month average produces roughly $2,638,910. Those are only about $3,300 apart, and both round to the identical $2,640,000 under the nearest-$10,000 rule — the gap simply isn’t wide enough to straddle a $10,000 rounding line. The $4,000,000 phase-out threshold isn’t so lucky. The eleven-month path produces an unrounded figure near $4,227,509, which rounds up to $4,230,000; the imputed path produces roughly $4,222,256, which rounds instead to $4,220,000. That unrounded figure sits only about $2,500 above the exact midpoint between $4,220,000 and $4,230,000 on the eleven-month path, so it’s a genuinely close call, sensitive to small revisions in the underlying average as much as to the missing-month question itself. The $25,000 SUV cap runs into the identical problem on its own, finer scale: the eleven-month path rounds to $33,100, the imputed path to $33,000. Until the IRS resolves the missing-month question in its own revenue procedure, the honest answer for the threshold and the SUV cap is a range, not a single number — the dollar limitation is the one figure this year’s data gap doesn’t touch.

The phase-out in practice

The phase-out mechanic matters most to businesses whose annual equipment purchases sit in the millions, not the thousands, so it’s worth walking through what it actually does to the deduction at different purchase levels.

A business buying $300,000 of equipment in 2027, with enough business income to absorb the deduction under the paragraph (b)(3) limit, expenses the entire amount. That figure is nowhere near either projected 2027 dollar limitation, so the phase-out in paragraph (b)(2) never engages at all.

A business placing $4,500,000 of section 179 property in service in 2027 is a different story. That figure exceeds both projected phase-out thresholds, so the reduction applies either way — only the size of the reduction depends on which threshold turns out to be correct. Against the $4,230,000 threshold, the excess is $270,000, which reduces the $2,640,000 dollar limitation to $2,370,000. Against the $4,220,000 threshold, the excess is $280,000, reducing the limitation to $2,360,000. Run that identical $4,500,000 of purchases against the confirmed 2026 figures instead — a $4,090,000 threshold and a $2,560,000 limitation — and the excess is $410,000, cutting the available deduction to $2,150,000. The same purchase total produces a smaller deduction in 2026 than it would under either 2027 projection, simply because both the threshold and the limitation move up together.

The “full phase-out point” row is simply the threshold plus the dollar limitation added together — the level of purchases at which the paragraph (b)(2) reduction has consumed the entire deduction and driven it to zero. A business whose equipment spending in 2027 reaches $6,860,000 to $6,870,000, depending on which threshold applies, has no section 179 deduction left to claim at all, whatever its business income might otherwise support.

That business-income constraint in paragraph (b)(3) is a separate gate from the phase-out, and it matters most to a business organized as a sole proprietorship or a single-member entity reporting on Schedule C, where the taxable income figure that caps the deduction runs through the same net earnings calculation this site’s guide to Schedule SE and the self-employment tax walks through. A sole proprietor whose business had a thin income year can find the dollar limitation and the phase-out threshold both irrelevant if the business simply didn’t earn enough to absorb the deduction that year — the disallowed amount carries forward rather than being lost, but it doesn’t offset this year’s income either.

Where bonus depreciation fits in

Section 179 isn’t the only route to writing off equipment immediately, and it’s worth being clear about where it stops and a separate provision picks up. Section 168(k)(1)(A), governing bonus depreciation, was rewritten by section 70301 of the same 2025 tax law: where the paragraph used to phase down a percentage over several years, it now simply reads “an allowance equal to 100 percent of the adjusted basis of the qualified property,” with no phase-down schedule left in that paragraph at all. Section 179 remains an election, limited by the dollar caps and phase-out described above and further capped by the business’s taxable income under paragraph (b)(3); bonus depreciation under section 168(k) isn’t bound by either of those limits the same way. A business that has already exhausted its section 179 dollar limitation for the year, or one whose income is too thin to absorb it, commonly still has the 100% bonus depreciation allowance available for the remaining cost. The interaction between the two provisions, and which one a given business should elect first, is a question specific enough to warrant its own separate treatment rather than a paragraph tacked onto this one. A large first-year deduction can also produce a business loss, and section 461(l) limits how much of such a loss you can use against other income: $264,000, or $528,000 on a joint return, in 2027 (excess business loss limit 2027).

The calendar from here

The IRS confirmed the 2026 section 179 figures in Revenue Procedure 2025-32, section 4.24. There’s no announced date yet for the 2027 revenue procedure, but recent years suggest a window running from mid-October through November. Until that publication resolves the missing-month question one way or the other, a business modeling a large 2027 equipment purchase should treat the phase-out threshold and the SUV cap as a range rather than a fixed number — $4,220,000 to $4,230,000, and $33,000 to $33,100 — while treating the $2,640,000 dollar limitation itself as settled. This site’s 2027 IRS inflation adjustments tracker will update with the confirmed figures once the revenue procedure is published, alongside the parallel projection for the 2027 QBI deduction threshold, which runs on the identical cost-of-living formula and carries the same October 2025 sensitivity in its own figures.

Sources

• 26 U.S.C. § 179 — law.cornell.edu/uscode/text/26/179
• 26 U.S.C. § 168 — law.cornell.edu/uscode/text/26/168
• Rev. Proc. 2025-32, § 4.24 (2026 section 179 limits) — irs.gov/pub/irs-drop/rp-25-32.pdf
• Bureau of Labor Statistics, Chained CPI-U series SUUR0000SA0 — api.bls.gov/publicAPI/v2/timeseries/data/
• finbarrow, IRS 2027 inflation adjustments tracker — companion page for the shared CPI window