How Construction Companies Can Maximize the Section 179 Tax Deduction

For construction companies navigating tight margins and increasing equipment costs, smart tax planning can create a crucial competitive edge. One of the most effective, yet often underutilized, strategies is the Section 179 tax deduction—a provision that allows businesses to immediately expense qualifying equipment and software purchases rather than depreciating them over several years.

With Section 179, construction companies can reduce their taxable income dollar-for-dollar by writing off the full cost of qualifying purchases made during the tax year. This tactic can result in significant upfront tax savings, improved cash flow, and more flexible reinvestment opportunities—advantages that are particularly valuable in today’s capital-intensive construction environment.

Section 179 of the IRS tax code is designed to encourage small and mid-sized businesses to invest in themselves by purchasing necessary equipment. For tax year 2025, the deduction limit is expected to be around $1.22 million, with a total spending cap of approximately $3.05 million before phase-out begins. These thresholds make Section 179 especially appealing for construction companies making routine investments in heavy machinery, vehicles, office equipment, or software.

New and used equipment both qualify, as long as it’s purchased (not leased) and placed into service by December 31 of the tax year.

Construction companies often face significant upfront costs for equipment purchases. Section 179 provides a way to recapture some of those costs in the same year they’re incurred, enhancing liquidity. This is especially helpful during growth periods or when gearing up for large projects that require equipment upgrades.

Additionally, when paired with bonus depreciation—which currently allows for a partial deduction of remaining costs not covered by Section 179—construction businesses can create a powerful combination of tax relief and reinvestment.

While Section 179 is simple in concept, timing and planning are key. The deduction can’t exceed your firm’s taxable income, so it’s important to work closely with a tax advisor to time purchases for maximum impact. Equipment financing also factors in—Section 179 still applies even if the purchase was made using financed dollars, allowing firms to deduct now and pay later.

Additional considerations should be made for ownership structures, especially for pass-through entities. While the pass through may claim a deduction for the 179 expense, there are additional limitations for the owners of pass-through entities.

At CSH, we understand the unique financial and operational challenges construction companies face. Our team combines deep construction industry insight with robust tax, advisory and accounting expertise to help firms like yours navigate Section 179 and other tax-saving strategies. Whether you’re expanding your fleet or investing in technology, we’ll help you build a plan that protects your cash flow and strengthens your bottom line.

Let’s talk about how we can help you put Section 179 to work.