Section 179 for Restaurants — How the Tax Math Works
Section 179 lets restaurants deduct up to $1,160,000 of equipment cost in year 1 instead of depreciating over 5–7 years. For a single-location operator buying $80K of equipment in 2026, that's roughly $19,200 in first-year tax savings at the 24% bracket. Financed equipment qualifies the same as cash-purchased — you can finance $80K with $8K down and still deduct the full $80K. This guide covers what qualifies, the 2026 limits, the bonus depreciation phase-out, and the active-income trap that catches most first-year operators.
IRS rule letting businesses expense up to $1.16M of qualifying equipment in year 1 instead of depreciating over 5–7 years (2026 limit).
Bonus depreciation
Additional first-year deduction on amounts above the Section 179 cap. 60% in 2026, 40% in 2027, 20% in 2028, 0% in 2029.
Placed in service
When the equipment is operational and ready for use — not when ordered or paid for. The placed-in-service date determines the tax year.
Active-income limit
Section 179 deduction is capped at the business's net taxable income for the year. Excess rolls forward but doesn't generate a refund.
Phase-out
Section 179 deduction starts reducing dollar-for-dollar when equipment placed in service exceeds $2.89M (2026), fully phased out at $4.05M.
$1,160,0002026 Section 179 Cap
$2,890,000Phase-Out Start
60%Bonus Depreciation 2026
40% / 20% / 0%Bonus 2027 / 2028 / 2029
~100%Restaurant Equipment Eligibility
What restaurant equipment qualifies
Pretty much everything in a commercial kitchen: walk-ins, freezers, hoods, ovens, ranges, fryers, charbroilers, dishwashers, ice machines, espresso machines, mixers, slicers, prep tables, POS systems, refrigeration. Used equipment qualifies as long as it's new to your business. Smallwares under the de minimis safe harbor ($2,500/item) can be expensed separately. Even off-the-shelf software (POS systems, scheduling apps) qualifies if purchased — not subscribed.
What doesn't qualify
Real estate (the building itself). Leasehold improvements that became structural (bathroom plumbing, walls). Inventory (food, paper goods, consumables — these are COGS, not capital). Land. Anything you lease (the lessor takes the deduction, not you). Equipment used less than 50% for business.
Financed equipment qualifies — the most under-used move in restaurant operations
You can finance equipment AND take the full Section 179 deduction in year 1. The deduction is based on the equipment's COST, not how much you paid down. Finance $80K with $8K down — you deduct the full $80K. This is the single most under-used tax move among first-year restaurant operators. Practical example: a 24% bracket operator who finances $80K of kitchen equipment effectively gets $19,200 back via reduced tax bill, making the net cost $60,800 instead of $80,000.
The active-income trap
Section 179 deduction is capped at your business's net taxable income for the year. If your restaurant nets $40K profit and you buy $80K of equipment, you can only deduct $40K via Section 179 in year 1. The remaining $40K rolls forward to next year (with the unused balance also eligible for bonus depreciation). For first-year operators with thin profit, this often means Section 179 saves less than expected — model the math against your projected P&L, not the equipment cost.
Q4 timing — why most restaurants buy equipment in November/December
Section 179 doesn't pro-rate. Equipment placed in service on December 31 gets the full year-1 deduction. This is why many restaurants accelerate equipment buys into Q4 — even financed buys count, as long as the equipment is delivered, installed, and operational by December 31. Caveat: 'placed in service' means actually working, not 'on the loading dock.' Build install timelines into your purchase planning.
State tax — not all states conform
Federal Section 179 rules don't automatically apply at the state level. California has its own (lower) limits and phase-outs. New York conforms to federal but with notification requirements. Some states require an add-back of Section 179 in the year taken plus a separate state-level depreciation schedule. Your CPA should run state separately — assume the federal calculator output is your federal savings only.
Section 179 Tax Savings Calculator (2026 limits)
Estimate first-year deduction, bonus depreciation, and net cost of restaurant equipment financed in tax year 2026.
Section 179 Deduction—
Bonus Depreciation (60% in 2026)—
First-Year Tax Savings—
Net Cost After Tax Savings—
2026 Section 179 limit: $1,160,000. Bonus depreciation phases down to 60% in 2026. This is a planning estimate — confirm with your CPA.
Frequently Asked Questions
Can I take Section 179 on used equipment?
Yes. Used equipment qualifies for both Section 179 and bonus depreciation under the 2017 TCJA rules, as long as it's new to your business.
What if I placed the equipment in service in December?
Doesn't matter — Section 179 doesn't pro-rate. Equipment placed in service on December 31 gets the full year-1 deduction. This is why restaurants often accelerate Q4 equipment buys.
Can I deduct loan interest separately?
Yes. Loan interest is a separate business expense, deductible in addition to the Section 179 equipment deduction. EFA payments split between principal and interest the same way.
What if my LLC has multiple members?
Section 179 deduction passes through to members on Schedule K-1, prorated by ownership percentage. The $1.16M cap applies at the entity level, not per member. Each member then applies their share against their personal active-income limit.
If I sell the equipment within 5 years, do I owe back the deduction?
Sort of. Sale within 5 years for more than the depreciated basis triggers depreciation recapture as ordinary income (up to the deduction taken). For a typical restaurant operator who keeps equipment 7–10 years, recapture is rare.
Can I take Section 179 on a vehicle?
Yes, but with limits. Heavy SUVs over 6,000 lbs GVWR qualify up to $30,500 (2026). Cars and light trucks have lower caps ($12,200 first-year for passenger autos in 2026). Restaurant delivery vehicles often qualify under the heavy-vehicle threshold.
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VI
Reviewed by Vlad Ivanov AI+SEO operator at wordsatscale.com. 9 GSC-verified sites; founder of the SearchGAP Method community. Bio + portfolio at wordsatscale.com.
