Restaurant Equipment Tax Deduction: Section 179 Guide

The restaurant equipment tax deduction under Section 179 is one of the most powerful tools available to restaurant owners making equipment purchases. If you bought a new oven, walk-in cooler, POS system, or commercial refrigerator in 2025 — or are planning to — understanding Section 179 and bonus depreciation could put tens of thousands of dollars back in your pocket this year rather than over 5–7 years of standard depreciation.

What Is Section 179?

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment in the year it's placed in service — instead of depreciating it over multiple years.

2025 Section 179 limits:

• Maximum deduction: $1,160,000 (indexed annually for inflation)
• Phase-out threshold: $2,890,000 in total equipment purchases
• Must be placed in service during the tax year
• Limited to your taxable income for the year (can't create a loss with Section 179)

What Restaurant Equipment Qualifies

Most tangible business equipment placed in service qualifies. For restaurants, that includes:

• Commercial ovens, ranges, and fryers
• Walk-in coolers and freezers
• Refrigeration units and display cases
• Dishwashers and warewashing equipment
• POS systems and hardware
• Exhaust hoods and ventilation systems
• Furniture and fixtures (with some limitations)
• Business vehicles over 6,000 lbs GVWR

What doesn't qualify: Real property (the building itself), most structural improvements, land.

Bonus Depreciation vs. Section 179

Bonus depreciation is a separate provision that has worked alongside Section 179. Key differences:

	Section 179	Bonus Depreciation
2025 rate	Full deduction (up to $1.16M)	40% of eligible property
Can create a loss?	No	Yes
Used property	Yes (if not previously owned)	Yes
Income limitation	Yes	No

Strategy: Use Section 179 first (up to your taxable income), then use bonus depreciation for any remaining eligible property. If you expect losses, bonus depreciation can be more valuable.

How to Calculate Your Tax Savings

Example: You purchase a $60,000 walk-in cooler and a $25,000 commercial oven in 2025. Total: $85,000 in eligible equipment.

Without Section 179 (7-year depreciation):

• Year 1 deduction: ~$12,000
• Tax savings at 25% rate: ~$3,000

With Section 179:

• Year 1 deduction: $85,000
• Tax savings at 25% rate: $21,250
• Accelerated savings vs. standard: $18,250

The cash flow benefit of taking the deduction immediately — rather than over 7 years — can be reinvested in operations, debt paydown, or the next equipment purchase.

Financing Equipment and Still Claiming Section 179

You don't have to pay cash to claim Section 179. Equipment purchased on financing — loans or leases — can still qualify, as long as it's placed in service during the tax year. This is a significant advantage: you can preserve cash by financing, while still taking the full deduction upfront.

Important: Work with your accountant to structure equipment leases properly. Operating leases may not qualify; capital leases typically do.

When to Make Equipment Purchases

Timing matters. Equipment must be placed in service (not just ordered or delivered) by December 31 to count in the current tax year. If you're planning a major equipment purchase:

• Don't wait until late December — installation delays can push the placed-in-service date
• Consider whether your taxable income will support the full deduction
• If you're expecting a loss year, bonus depreciation may be more valuable than Section 179

FAQ: Restaurant Equipment Tax Deduction Section 179

How much can a restaurant deduct under Section 179 in 2025?

Up to $1,160,000 in equipment placed in service during 2025, subject to your taxable income for the year. The deduction phases out above $2,890,000 in total equipment purchases.

Does used equipment qualify for Section 179?

Yes — used equipment qualifies for Section 179 as long as it's new to your business (you didn't previously own it). This makes purchasing used commercial kitchen equipment from an auction or closure very tax-efficient.

Can I claim Section 179 if I'm financing the equipment?

Yes. Equipment purchased on a loan or capital lease qualifies for Section 179 as long as it's placed in service during the tax year. You get the full deduction while preserving cash through financing.

Should I use Section 179 or bonus depreciation?

Use Section 179 first to fully deduct up to your taxable income, then use bonus depreciation for any remaining eligible property. If you expect to show a net loss, bonus depreciation is preferable since Section 179 cannot create a loss.

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