There’s one catch, though: to claim the deduction on your 2026 return, your equipment must be installed, set up, and ready to use by December 31. A signed quote or a late-December delivery may not be sufficient to satisfy the requirement.
So, how do these rules work, what do you need to know, and how do you ensure your practice is able to take full advantage of this tax benefit? We dive into all those questions below.
How The Rules Work in 2026
When you buy equipment for your business, the IRS generally requires you deduct the cost gradually through depreciation over the useful life of the asset. However, two tax provisions let you deduct the full cost up front:
- Bonus depreciation allows you to write off 100% of the cost of qualifying equipment in the first year (with no dollar cap) and no taxable income limit. This is now permanent for equipment acquired and placed in service after January 2025, and it applies by default unless you or your accountant choose to opt out.
- Section 179 is the older, more flexible option, which allows you to choose which equipment to expense and how much of its cost to deduct. For the 2026 tax year, the maximum Section 179 deduction is $2,560,000. It begins to phase out once your total qualifying purchases for the year pass $4,090,000 and is eliminated by $6,650,000.
Bonus depreciation vs Section 179 at a glance
| Bonus Depreciation | Section 179 | |
| How much you can deduct | 100% of the cost, with no dollar cap | Up to $2,560,000 in 2026 |
| Purchase and size limits | None | Phases out once total purchases pass $4,090,000 |
| How it applies | Automatically, unless you opt out | Only if you choose to use it |
| Flexibility | All or nothing: it applies to all equipment in the same asset class for the year | Pick which equipment to deduct, and how much of each |
| Income Limit | None | Can’t exceed your business income for the year |
| Best for | Practices that want the simplest full write-off | Practices that want to fine-tune what they deduct and when |
Both provisions cover medical equipment, but they work differently, and the right approach depends on several factors. Your accountant can help you decide whether a bonus depreciation, Section 179, or a combination makes the most sense for your facility.
Which Facilities Benefit?
These deductions help businesses that pay federal income tax. That includes private neurology practices, independent sleep labs, IONM providers, outpatient and multi-specialty groups, and newer practices that are still building out their equipment. Solo practitioners also qualify.
Tax-exempt organizations, like many non-profit hospitals, generally don’t pay federal income tax, so these deductions usually don’t apply to them. How much any practice benefits depends on its income and overall tax picture, which is a question for your accountant.
What Changed Year Over Year
If you’re looking around for information online, you may have noticed there are different percentages and limits listed. That’s because the rules have shifted several times over the last few years.
| Tax Year | Bonus Depreciation | Section 179 Maximum | Section 179 Phase-Out Begins |
| 2024 | 60% | $1,220,000 | $3,050,000 |
| 2025 | 100% for equipment acquired after January 19 | $2,500,000 | $4,000,000 |
| 2026 | 100% (now permanent) | $2,560,000 | $4,090,000 |
The largest shift came with the One Big Beautiful Bill Act, signed in July 2025. It permanently restored the 100% bonus depreciation and roughly doubled the Section 179 maximum deduction figures, adjusted for inflation, but the phase out threshold increased just under 30%.
However, it’s also important to note that not every state follows Section 179 and the federal bonus depreciation rules, so your state return may look different.
Does Financing or Renting Qualify?
Financed purchases qualify. As the equipment owner, you can deduct the full cost of the equipment in the year you put it into use, even if you’re paying for it over time.
If you’re renting equipment that goes back at the end of the term, those payments are typically deducted as a regular business expense over the rental term.
Do Software, Installation, Training, or Service Contracts Qualify?
Installation and delivery costs are generally added to the cost of the equipment, so they’re deducted along with it. Software that comes with your system is typically treated the same way. Software that’s purchased separately may follow different rules though, so it’s worth confirming that with your accountant.
Can My Sales Representative Tell Me How Much I’ll Save?
Your Cadwell rep can walk you through pricing, financing options, and what realistic delivery and installation timelines look like. What they can’t do is calculate your tax savings, since that depends on your income, your other purchases, and how your accountant files.
Your accountant or tax advisor is the right person to make that call, and the calculator below can give you a starting estimate.
Financed Equipment Qualifies, Too
You don’t need to pay for equipment in full to deduct its full cost. If you finance a purchase, you can generally write off the entire price in the year the equipment goes into use, even though your payments may stretch into future years.
That can make a substantial difference for cash flow. As an example: if a practice finances a $100,000 system and its combined tax rate is 30%, a full first-year dedication could lower its tax bill by roughly $30,000, while only a portion of the purchase price has been paid.
To get a starting estimate for your practice, try this free Section 179 tax savings calculator. Enter the cost of the equipment you’re considering and your estimated tax bracket, then bring the results to your accountant to confirm what applies to you.
The Rule That Decides Your Tax Year: Placed In Service
Buying equipment isn’t what triggers the deduction. The IRS ties it to the date the equipment is “placed in service,” meaning it’s ready and available for its intended use in your practice.
For 2026, that has to happen by December 31. That comes down to a few different things:
- Delivery alone isn’t enough. If your equipment is still boxed up, then it isn’t considered “placed in service.”
- It needs to be installed and set up. The system should be in place and ready to operate in the space where you’ll use it.
- It doesn’t need to be seeing patients yet. Equipment that’s installed and ready in December still counts for 2026, even if your first study is scheduled for January 2027.
So how does this work in practice? Say a sleep lab signs a quote on December 10th, the system arrives December 28th, and installation wraps up on January 6th. Even though the purchase happened in 2026, the deduction would most likely land on the 2027 return.
That’s why planning around your installation date, not your order date, is vital.
Plan Your Year-End Purchase with Cadwell
If you’re already planning on getting new equipment for the new year, buying and installing it before December 31 could offer a significant savings opportunity. Plus, the sooner you start, the more flexibility you’ll have on configuration, delivery, and installation.
Your Cadwell rep can help you choose the right system, walk through financing options, and lock in a delivery and installation date that fits your timeline. Contact our team for more information.
Cadwell Industries, Inc., does not provide tax advice. For such advice, consult with a qualified professional advisor to determine your eligibility for bonus depreciation, a Section 179 tax deduction, or other tax benefits that may be available.