Most dental equipment is a business asset you would normally depreciate over several years. Two provisions of the federal tax code let you deduct much or all of the cost in the year you put it into service instead: Section 179 expensing and bonus depreciation (the tax code calls it the special depreciation allowance). For a practice buying a chair package, a CBCT, or an entire startup buildout, the difference between deducting the cost this year and spreading it over five to seven years can be a large swing in cash flow.
The rules changed in 2025. The law signed on July 4, 2025, commonly called the One Big Beautiful Bill Act, raised the Section 179 limit and restored 100 percent bonus depreciation on a permanent basis for property acquired after January 19, 2025. This guide covers what applies for the 2026 tax year, how used equipment qualifies, and the mistakes that cost owners money.
Key takeaways
- For tax years beginning in 2026, the Section 179 limit is $2,560,000, reduced dollar for dollar once total Section 179 property placed in service exceeds $4,090,000 (IRS Rev. Proc. 2025-32).
- Bonus depreciation is 100 percent, with no dollar cap, for qualified property acquired after January 19, 2025. The 2025 law made that permanent.
- Used dental equipment can qualify for both, as long as you did not use it before and did not buy it from a related party.
- The equipment must be placed in service (installed and ready to use) during the tax year. Buying it in December and installing it in February pushes the deduction to the next year.
- Many states do not follow federal bonus depreciation, and some cap Section 179 far lower. Your state return may look very different.
- A big deduction now means a taxable gain later if you sell the equipment. Plan for recapture.
The 2026 numbers, from the IRS
| Item | Tax years beginning in 2025 | Tax years beginning in 2026 | Source |
|---|---|---|---|
| Section 179 maximum deduction | $2,500,000 | $2,560,000 | IRS Pub. 946 (2025); Rev. Proc. 2025-32 |
| Phase-out begins when Section 179 property placed in service exceeds | $4,000,000 | $4,090,000 | Same |
| Section 179 limit for certain SUVs | $31,300 | $32,000 | Same |
| Bonus depreciation rate | 100% for property acquired and placed in service after Jan. 19, 2025; 40% for property acquired before Jan. 20, 2025 and placed in service in 2025 (an election to use 40% was also available) | 100% for qualified property acquired after Jan. 19, 2025 | IRS Pub. 946; Notice 2026-11 |
The IRS published interim guidance on the permanent 100 percent bonus deduction in Notice 2026-11 in January 2026. You can read the IRS announcement, the full Rev. Proc. 2025-32 with the 2026 inflation adjustments, and IRS Publication 946, which explains depreciation rules in detail.
Section 179 vs. bonus depreciation: how they differ
Both let you deduct equipment cost up front. They work differently, and a CPA will often use them together.
| Feature | Section 179 | Bonus depreciation |
|---|---|---|
| Dollar limit | $2,560,000 for 2026, phased out above $4,090,000 | No dollar cap |
| Income limit | Limited to taxable income from your active trades or businesses; unused amounts carry forward | Not limited by income; can create or increase a loss |
| How you take it | An election, made asset by asset on Form 4562 | Applies automatically unless you elect out, and the election out applies to an entire class of property for the year |
| Flexibility | Pick exactly which assets and how much | All or nothing by property class (or elect a reduced rate in limited transition cases) |
| Used equipment | Eligible if acquired by purchase and not from a related person | Eligible if not previously used by you and not from a related party, among other conditions |
| State treatment | Many states follow; some cap it lower | Many states do not follow |
A common approach: use Section 179 on specific assets where you want control, and let bonus depreciation cover the rest. With 100 percent bonus back, many practices will get the full first-year deduction through bonus alone. Section 179 still matters when a state follows Section 179 but not bonus, or when you want to expense some assets and depreciate others.
Does used dental equipment qualify?
Yes, for both, with conditions. This is one of the most important points for anyone buying from a liquidator, a closing practice, or a marketplace.
Section 179 and used equipment
IRS Publication 946 allows Section 179 on used property as long as it is acquired by purchase. Property you acquire from a related person (for example, certain family members or an entity you control) generally does not qualify, and neither does property received as a gift or inheritance.
Bonus depreciation and used equipment
The IRS bonus depreciation FAQ lists the conditions for used property. In plain terms, used equipment qualifies if:
- You (or a predecessor) never used that specific property before you acquired it.
- You did not acquire it from a related party or a member of your controlled group.
- Your basis is not determined by the seller's basis (so it is a true purchase, not a carryover transaction).
- It was not inherited.
What about equipment that comes with a practice purchase?
When you buy a practice, the purchase price is allocated among asset classes, including equipment, supplies, and goodwill. The amount allocated to equipment can often qualify for first-year expensing if the other conditions are met. Goodwill does not; it is generally amortized over 15 years. How the price is allocated is negotiated between buyer and seller and has opposite tax effects for each side, so it deserves attention during the deal. Our practice acquisition guide covers the deal side.
What counts as qualifying dental property
- Usually qualifies: chairs, delivery systems, lights, x-ray and imaging equipment, sensors, scanners, sterilizers, compressors, vacuums, handpieces, lab equipment, computers, and furniture used in the business.
- Off-the-shelf software: can qualify under Section 179.
- Building improvements: interior improvements to a nonresidential building may qualify as qualified improvement property, which has its own rules. Ask your CPA how your buildout is classified, since plumbing, electrical, and cabinetry are sometimes split between equipment and building components.
- Small items: for low-cost purchases, the IRS de minimis safe harbor lets many businesses expense items up to $2,500 per invoice or item (or $5,000 with an applicable financial statement) by attaching an election statement to a timely filed return.
The placed-in-service rule
You deduct equipment in the year it is placed in service, which IRS Publication 946 describes as when it is ready and available for its specific use. For dental equipment, that usually means installed and functional, not sitting on a pallet in your garage.
This is where year-end buying goes wrong. A practice orders a chair package in November expecting a current-year deduction, but freight, installation scheduling, and a backordered part push installation into January. The deduction moves to the next tax year. For used equipment, removal, freight, and reinstallation add weeks. Our shipping guide covers the freight side.
Year-end purchase checklist
- Purchase documented with a dated invoice in the practice's name
- Installation scheduled with margin before December 31
- Utilities (air, water, electrical, network) ready before delivery
- Technician sign-off or installation record showing the date it was ready for use
- For x-ray equipment, state registration steps started (see our x-ray registration guide)
- Photos of the installed equipment with date stamps
- CPA notified with invoices, installation dates, and whether the seller is related to you
Financed and leased equipment
You do not need to pay cash to take the deduction. Equipment bought with a loan qualifies based on its full cost, even though you pay for it over time. That creates the situation owners find attractive: a first-year deduction larger than the first year of payments.
Leases are different. A lease structured as a conditional sale, such as a $1 buyout lease, is generally treated as a purchase for tax purposes, so the equipment can qualify for Section 179 or bonus depreciation. A true lease, such as a fair market value lease, is generally treated as a rental; you deduct the lease payments as you make them and do not take depreciation on the equipment. Our guide to leasing vs. financing vs. cash walks through the structures with worked examples.
Worked example: a used equipment purchase in 2026
This is a hypothetical example with made-up numbers to show the mechanics. It is not a projection of your taxes.
Example: a practice owner buys a used equipment package for three operatories from an unrelated liquidator in 2026: chairs, delivery units, lights, a sterilizer, and a compressor, for $85,000 including freight and installation that is capitalized as part of the cost. Everything is installed and working by October 15, 2026. The practice is financed with an equipment loan. Assume a hypothetical combined federal and state marginal tax rate of 35 percent, and a state that follows federal rules.
| Approach | Year 1 deduction (hypothetical) | Approximate tax effect in year 1 at 35% |
|---|---|---|
| Regular depreciation over several years | A fraction of the $85,000 in year 1, the rest spread over later years | Smaller year 1 savings, larger savings later |
| 100% bonus depreciation | $85,000 | About $29,750 less tax in year 1 |
| Section 179 on all of it | $85,000, if business income is at least that much | About $29,750 less tax in year 1 |
Two things to notice. First, the total deduction over time is the same; accelerated depreciation shifts timing. The benefit is cash now, plus the chance that your tax rate is lower in the year you take the deduction than in later years (or the risk that it is higher, which argues for spreading it out). Second, if the practice has only $50,000 of business income in 2026, Section 179 is limited to that and the rest carries forward, while bonus depreciation could create a loss. Which is better depends on the rest of your tax picture.
Where state taxes change the picture
Federal rules are only half the calculation. States decide separately whether to follow federal bonus depreciation and Section 179 limits, and many do not follow bonus. California is a well-known example: its tax instructions state that California does not conform to federal bonus depreciation and that its own Section 179 limit is $25,000, reduced once qualifying purchases exceed $200,000. A practice in a non-conforming state may take a full deduction on the federal return and a much smaller one on the state return, then track the difference for years.
Midwest states vary too, and conformity can change with each legislative session. Ask your CPA what your state does for the specific tax year.
The catch: recapture when you sell
When you deduct the full cost of equipment up front, your tax basis in it drops to zero. If you later sell that equipment, the gain up to the amount of depreciation you took is generally taxed as ordinary income under the depreciation recapture rules. Selling a fully expensed chair package for $20,000 when you retire or upgrade can create $20,000 of ordinary income.
That is not a reason to avoid first-year expensing. It is a reason to know it is coming. Sellers who plan a practice sale or equipment liquidation should get a recapture estimate from their CPA before agreeing on a price. Our guides on where to sell used equipment and pricing equipment when selling a practice cover the sale side.
Section 179 also has its own recapture rule: if business use of a Section 179 asset falls to 50 percent or less in a later year, part of the deduction can be recaptured. For dental equipment used only in the office, this rarely applies, but it matters for anything with personal use.
Common mistakes that cost practices money
- Buying equipment you do not need to "save on taxes." A deduction saves only your marginal rate. Spending $50,000 to save perhaps $15,000 to $20,000 in tax is still spending $30,000 or more.
- Missing the placed-in-service date. Delivered is not the same as ready for use.
- Buying from a related party and assuming first-year expensing applies.
- Ignoring the state return. Non-conforming states can turn a clean federal picture into a multi-year tracking problem.
- Forgetting recapture when negotiating a practice sale or selling equipment.
- Taking the whole deduction in a low-income startup year. A new practice with little income may get more value from spreading deductions into higher-income years. Electing out of bonus depreciation is a real option to discuss.
Questions to bring to your CPA
- Should we use Section 179, bonus depreciation, regular depreciation, or a mix this year, given our projected income?
- Does our state follow federal bonus depreciation and Section 179 for this tax year?
- Is any seller a related party under the rules for Section 179 or bonus depreciation?
- How should the buildout be split between equipment, qualified improvement property, and building components?
- Is our lease a conditional sale or a true lease for tax purposes?
- What recapture would we face if we sold this equipment in three, five, or ten years?
Next steps
Get the invoices, installation dates, and seller details organized before year end, and have the conversation with your CPA before you buy, not after. For the financing side, read practice startup financing and leasing vs. financing vs. cash. For the broader money picture, see the financial management chapter of our operations guide.
Educational content only. It is not legal, financial, tax, or clinical advice. Prices and ranges are approximate and vary by region, condition, and year. Verify current rules with your state dental board and qualified professionals. ChairsideSource is not affiliated with any manufacturer, the ADA, or the DAT.