The IRS Just Raised Your 2027 Equipment Write-Off to $2.64 Million — Here's the Full List

On November 5, 2026, the IRS released its tax year 2027 inflation adjustments for almost 70 provisions. Buried in Revenue Procedure 2026-35 are several numbers that change what an equipment purchase, a payroll benefit, or a pass-through deduction is worth to a small business. The headline: the Section 179 expensing limit climbs to $2,640,000, up from $2,560,000.

These adjustments generally apply to returns you file in 2028, so nothing here changes your 2026 return. But the numbers matter now, because they shape how you budget purchases, set up benefits for open enrollment, and plan your entity structure for next year.

The Small Business Numbers at a Glance

Here are the figures most owners will care about, drawn from the IRS announcement and published technical summaries of Rev. Proc. 2026-35. One of those summaries notes it was prepared with AI assistance, so confirm any figure you plan to rely on against the Revenue Procedure itself.

• Section 179 expensing limit: $2,640,000 (up from $2,560,000).
• Section 179 phase-out threshold: $4,230,000 of qualifying purchases, per a technical summary of the ruling.
• SUV limit under Section 179: $33,100 (up from $32,000).
• Qualified transportation fringe and parking: $350 per month (up $10).
• Health FSA salary reduction limit: $3,500 (up $100), with a carryover limit of $700 (up $20).
• Cash-method gross receipts test: $33,000,000.
• Excess business loss limit: $528,000 for joint filers and $264,000 for others.
• Standard deduction: $33,200 for married couples filing jointly (up $1,000) and $16,600 for single filers.

What the Bigger Section 179 Limit Actually Means

Section 179 lets you deduct the cost of qualifying equipment and certain property in the year you place it in service, rather than spreading the deduction over many years. A higher cap means a larger one-year write-off before the deduction starts shrinking.

The phase-out is the part owners often miss. Once your total qualifying purchases in a year pass the phase-out threshold, the deduction reduces dollar for dollar. For 2027, that threshold is reported at $4,230,000. Most small businesses never come near it, but a contractor or manufacturer making a big fleet or machinery purchase could.

The deduction is also limited to your business income, so it cannot create a loss by itself. If you are thinking about a major purchase, the real question is timing: whether the deduction is worth more this year or next.

The SUV Limit Still Bites

The cap for heavy SUVs rises to $33,100. If you were planning to write off a full-size vehicle in one year, remember that the first-year deduction for that category is limited well below the sticker price of most new trucks and SUVs. Keep a mileage log and business-use records, because vehicle deductions draw scrutiny.

Benefits Budgets: FSAs and Commuter Perks

If you offer a cafeteria plan, the health FSA limit rises to $3,500 for 2027. That gives employees a bit more room to set aside pre-tax dollars for medical costs, and it slightly lowers your payroll taxes on the amounts they contribute. The carryover limit, for plans that allow it, increases to $700.

The monthly cap for employer-provided transit and parking benefits goes to $350. If you cover parking or transit passes for staff, update your payroll settings before January so you do not accidentally treat a taxable amount as tax-free.

Open enrollment season is the natural moment to communicate both changes. Even if you do not offer an FSA today, ask your payroll provider what a basic plan would cost to administer.

Pass-Through Owners: QBI Thresholds Move Too

The qualified business income deduction thresholds also adjust. A technical summary of the ruling lists $416,600 for married couples filing jointly and about $208,300 for other filers, with phase-in ranges extending to $566,600 and $283,300 respectively. Below the threshold, the deduction is generally simpler to calculate; above it, wage and property limits and the type of business can reduce it.

The same summary lists a $415 minimum deduction for active qualified business income. That is small, but it matters for side businesses with modest profits.

If you are deciding between entity types, these thresholds are one input. Our guide on LLC vs S corp walks through how owner pay and taxes interact, and LLC formation covers the starting point.

Your Personal Tax Picture for 2027

For sole proprietors and pass-through owners, individual brackets are what really set your tax bill. The top rate stays at 37%. For single filers, the 10% bracket runs up to $12,800, the 22% bracket begins above $52,025, and the 24% bracket begins above $109,125. For joint filers, 10% runs up to $25,600, with 22% above $104,050 and 24% above $218,250.

The Child Tax Credit reaches $2,300 per child (up $100), and the annual gift exclusion rises to $20,000. The estate basic exclusion amount becomes $15,480,000. Those matter mostly for owners planning to transfer a business to family.

IRS CEO Frank Bisignano said in the announcement that individuals and businesses "will see increased tax benefits next tax year."

Penalty Amounts Also Rise

Inflation adjustments hit penalties too. For large businesses, the information return failure penalty is listed at $360 per return, and partnership and S corporation late-filing penalties are $265 per partner or shareholder per month. If you run a multi-owner entity, a missed filing gets expensive fast. Put your return deadlines on a calendar and keep records tidy through a dedicated business bank account.

What to Do Before December 31

1. List planned equipment purchases. Decide whether they belong in 2026 or 2027, then ask your tax preparer how the Section 179 limit and your expected income interact.
2. Check your books. A current profit and loss statement shows how much income you have to absorb a deduction.
3. Update payroll settings. Change the FSA and transit benefit caps for 2027 before the first January payroll.
4. Review owner pay. If you run an S corporation, ask whether your salary and distribution mix still make sense given the new QBI thresholds.
5. Review contractor classification. Information-return penalties apply to forms you file for workers, so make sure you classify people correctly. See independent contractor vs employee.

The Bottom Line

None of these changes rewrites the rulebook, but together they give owners a little more room: a larger expensing cap, slightly higher benefit limits, and wider deduction thresholds. The sensible move is to treat the next eight weeks as planning season. Gather your purchase list, talk to your tax professional, and decide where each dollar of spending belongs.

This article is general information, not tax advice. Confirm figures against Revenue Procedure 2026-35 and consult a qualified tax professional.

Sources: IRS news release IR-2026-133 (November 5, 2026); Accounting Today; CPA Practice Advisor; Current Federal Tax Developments.

Photo by Kelly Sikkema on Unsplash