Deducting Your Tech Equipment Purchases and R&D Expenses for 2025
If your business invested in new IT hardware and software (“equipment”) in 2025, including for research and development (R&D) efforts, two provisions of the U.S. tax code allow you to write off such purchases this year.
Section 179 Equipment Credit: According to section179.org, deductions can include:
Desktop and laptop computers, servers, networking gear, etc.
Peripheral devices (monitors, print technology, external drives) essential to business tasks
Commercial off-the-shelf software (non-custom)
Section 41 R&D Tax Credit: Under the One Big Beautiful Bill Act (OBBBA) signed into law earlier this year, the existing Section 41 R&D tax credit remains available for 2025. This credit can be used in coordination with the OBBBA’s new immediate deduction rules in Section 179.
There’s Still Time for New IT Infrastructure Investment
Visual Edge IT reminds you there’s still time to make year-end investments to upgrade your business’s IT infrastructure. We also encourage you to consult with your accountant on how to take advantage of both credits. Here are the guidelines for each Section.
Section 179
Under Section 179, businesses can immediately deduct the full cost of qualifying business equipment and software in the year those assets are placed into service. This is opposed to having to write off the cost of equipment over several years through standard depreciation.
To qualify, newly purchased equipment must be:
Used more than 50% for business purposes
Purchased and placed into service during the 2025 tax year
If equipment is used partly for personal reasons, the deduction is prorated based on business use.
For the 2025 tax year, the OBBBA increased the Section 179 limits, making it more generous for small and mid-sized businesses (SMBs). Under these updated rules:
Businesses can elect to deduct up to $2,500,000 of qualifying purchases in 2025.
This deduction begins to phase out once total eligible equipment purchases exceed $4,000,000, and disappears entirely at $6,500,000 of spending.
This expanded threshold was designed to encourage investment in business tools and technology without forcing businesses to wait years for depreciation benefits. In many cases, according to the Bipartisan Policy Center, Section 179 can be combined with 100% bonus depreciation for any remaining basis, allowing even larger tax benefits when acquiring technology assets in 2025.
Consult your business’s tax professional to ensure eligibility and optimize timing before year-end.
Section 41 and Other Key R&D Provisions for 2025
Per the OBBBA, deductible R&D expenses can include:
IT hardware and equipment purchased for research activities, such as servers, computers, and lab devices.
Systems and services directly supporting R&D, including cloud infrastructure, cybersecurity tools, and IT systems to support AI and engineering design software.
Software development costs including cloud platforms and associated internal tools, such as those for data and workflow management.
Immediate deductions
The OBBBA’s primary change for the 2025 tax year is the restoration of the ability to immediately deduct U.S.-based R&D costs in the year they are incurred. This change reverses a previous requirement to amortize these costs over five years.
For tax years beginning after December 31, 2024, businesses can once again deduct 100% of their domestic R&D expenses immediately.
The existing Section 41 R&D tax credit also remains available and can be used in coordination with the new immediate deduction rules.
Associated 2025 OBBBA guidelines for R&D equipment cost write-offs include:
Foreign R&D: Costs for research conducted outside the U.S. must still be capitalized and amortized over a 15-year period.
Transition Rules for 2022-2024 Costs: The OBBBA provides two options for handling domestic R&D expenses that businesses were required to capitalize in the 2022-2024 tax years:
Option 1 (for all businesses): Businesses can elect to deduct any remaining unamortized R&D balance either entirely in the 2025 tax year or spread the deduction ratably over 2025 and 2026.
Option 2 (for eligible small businesses): Small businesses with average annual gross receipts of $31 million or less from 2022-2024 can choose to apply the new rules retroactively. To do so, they must file amended returns for the 2022, 2023, and 2024 tax years to claim immediate deductions and potential refunds. The deadline to amend these returns is July 4, 2026.
Record-Keeping Essentials
To substantiate your claims for Section 179, Section 41, or both, be sure to maintain detailed records such as:
Purchase invoices or financing agreements
Installation dates and the date you first place the equipment into service
Usage logs for equipment assets
Maintenance records that can help demonstrate consistent business use
Accurate documentation is your best defense should the IRS ever review your return.
Why Invest in IT? Read More
For organizations of all sizes, staying ahead of competitors is one reason the ongoing investment in IT equipment is essential. But there are other reasons to implement the latest technologies for your business’s IT infrastructure. Read what they are in this associated Visual Edge IT blog.
What Is the Role of Information Technology in Today’s Business?
Act Now!
Contact us today to assess and upgrade your business’s IT foundation and take advantage of these technology tax deductions for 2025.