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Methodology
Sources: partner-lender program data + industry research Editorial standards: methodology Disclosures: advertising + lender relationships

Equipment Depreciation Tables

Equipment Depreciation Tables. Comprehensive guide covering the topic in depth, with worked examples, current data, and cross-references.

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Depreciation tables show the percentage of equipment cost that can be deducted each year under various IRS systems. Use these tables to plan your tax strategy and compare options.

Section 179 (2025)

Maximum deduction: $1,250,000 in the year equipment is placed in service.

Phase-out: begins at $3,130,000 of total qualifying purchases.

Above $4,380,000, no Section 179 available.

Bonus depreciation phase-down

Year placed in service Bonus percentage
2022 100%
2023 80%
2024 60%
2025 40%
2026 20%
2027 0% (under current law)

Note: Congress could extend bonus depreciation. Check current law before planning.

MACRS 5-year property

For light trucks, computers, office equipment, some manufacturing equipment.

Year Depreciation %
1 20.00%
2 32.00%
3 19.20%
4 11.52%
5 11.52%
6 5.76%

MACRS 7-year property

For most heavy equipment, ag equipment, furniture, fixtures.

Year Depreciation %
1 14.29%
2 24.49%
3 17.49%
4 12.49%
5 8.93%
6 8.92%
7 8.93%
8 4.46%

MACRS 15-year property

For land improvements, certain restaurant property, gas station improvements.

Year 1: 5.00%

Year 2: 9.50%

Year 3: 8.55%

Year 4: 7.70%

… (declining schedule over 16 calendar years due to half-year convention)

Common equipment classifications

Equipment MACRS class
Class 8 truck 3-year (over-the-road) or 5-year (vocational)
Light truck / van 5-year
Computer / IT equipment 5-year
Office equipment 5-year or 7-year
Heavy construction equipment 5-year
Agricultural equipment 7-year
Manufacturing equipment 7-year
Restaurant equipment 5-year (most kitchen equipment)
Furniture, fixtures 7-year
Tractor (farming use) 7-year
Mobile homes 27.5-year

Worked example: $200,000 equipment in 2025

5-year MACRS property, no Section 179 election:

  • Bonus depreciation: $200,000 × 40% = $80,000
  • Remaining basis: $120,000
  • Year 1 MACRS: $120,000 × 20% = $24,000
  • Total year 1 deduction: $104,000
  • Year 2 MACRS: $120,000 × 32% = $38,400
  • … continues per schedule

Alternative: Section 179 + bonus:

  • Section 179: $200,000 (entire amount, assuming income limit met)
  • Bonus: $0 (nothing left)
  • Year 1 deduction: $200,000

The Section 179 path produces $96,000 more deduction in year 1 but eliminates future-year deductions.

State conformity

State income tax rules vary:

  • Some states conform fully to federal Section 179 and bonus
  • Some states cap Section 179 lower than federal
  • Some states decouple bonus depreciation entirely
  • Some states have unique add-backs and adjustments

States with significant decoupling include New York, New Jersey, California, Pennsylvania, Ohio.

Listed property rules

Certain “listed property” (luxury autos, computers, communication equipment) is subject to additional restrictions:

  • Must be used more than 50% for business
  • Below 50% business use triggers different depreciation rules
  • Recapture possible if business use drops below 50% after Section 179 claimed

How to use these tables

  1. Identify your equipment’s MACRS class
  2. Plan Section 179 election based on taxable income
  3. Apply bonus depreciation to remaining basis
  4. Apply MACRS to whatever remains
  5. Confirm state conformity with your CPA
  6. Document placed-in-service date

Action steps

  1. Confirm equipment classification with CPA
  2. Project taxable income to optimize Section 179
  3. Time placed-in-service date to maximize current year benefit
  4. Track depreciation on Form 4562 annually
  5. Maintain in-service documentation permanently
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Editorial review by Ed Stapleton Jr. · Founder & Editor

How lenders look at this and what to watch for

What underwriters weigh on this

Lenders evaluating an application affected by this topic look at a small set of factors that drive most of the decision. The four below are the ones that move the rate.

  • Personal credit of principals. For owners with 20 percent or more equity, personal FICO drives both the available program and the rate. The pull is soft at prequalification, hard at formal application with the chosen lender.
  • Owner background and depth. Years of related industry experience, prior ownership of similar equipment, and any documented success operating the asset class affect underwriting. New entrants to a class price differently from established operators expanding within their lane.
  • Geographic operating territory. Where the equipment will operate matters. Some lenders prefer single-state operation; others price interstate or cross-border use differently. The lender match changes if the equipment will operate outside the home state regularly.
  • Financial statement quality. For transactions above $250,000, lenders weight the quality of financial statements: are they CPA-prepared, are they current within 90 days, do they reconcile to bank statements. Strong financial reporting opens up better pricing on larger transactions.

Common pitfalls

The patterns below show up repeatedly on financing transactions. Catching any of these at the application or document-review stage saves real money later.

Cross-collateral creep

Adding new equipment financing through the same lender often includes cross-collateral language that ties the new equipment to the prior loan and vice versa. Not always bad, but it limits flexibility if you need to sell or refinance one piece of equipment without paying off the other.

Personal guarantee scope

On most equipment loans under $250,000, owners with 20 percent or more equity sign personal guarantees. Read the guarantee language. Some guarantees are limited to the specific loan; others are continuing and cover any future borrowing from the same lender. Limit the guarantee to the specific transaction when possible.

Trade-in payoff timing

If your transaction includes a trade-in with an existing lien, the new lender pays off the trade-in lien as part of the funding. Verify the trade-in payoff amount the new lender uses matches the actual payoff from the prior lender (which can include accrued interest and fees through the funding date). A $500 to $2,000 gap is common if this is not reconciled.

Fleet vs single-unit pricing

When financing more than one unit, ask whether the lender treats it as a fleet transaction (often with better pricing) versus separate single-unit transactions. The difference can be 50 to 150 basis points on a multi-unit deal. Some lenders default to single-unit treatment unless the borrower asks for fleet structure.

Pre-signing due diligence

The pre-signing window is when negotiation room exists. After signing, the buyer owns the discrepancy between what was discussed and what is documented. The items below cover the highest-leverage checks.

  • Emissions compliance. For diesel-powered equipment, confirm the unit meets current emissions requirements for the state and operation it will be used in. Tier 4 final compliance, urea/DEF system status, and after-treatment health all affect both legality of use and resale value.
  • Wear items documented. Tires, tracks, undercarriage, cutting edges, brakes. Photograph and note remaining life. These are the items that will need replacement first and that buyers under-budget for.
  • Recall and campaign status. Manufacturer recalls and service campaigns sometimes go uncompleted on used equipment. Verify outstanding recalls before purchase; some are mandatory and prevent the equipment from being registered or operated in certain jurisdictions until completed.
  • Hour or mileage reading verified. Photographed at signing, recorded in writing on the bill of sale, and matched to the seller representation. Hours and miles are the single biggest driver of asset value at term-end.
  • Attachment compatibility. For machinery with attachments, confirm the attachments included are compatible with the base unit configuration (quick-coupler standards, hydraulic pressure ratings, mounting interfaces). Buying attachments that do not fit is a common surprise on used equipment with mixed-vintage components.

Common questions on this

Can I pay off the loan early?
Yes, but check the pre-payment provision in your documents. Some structures carry a pre-payment penalty in the first 12 to 36 months. Others are open. Knowing the payoff math before signing prevents surprises if you decide to refinance or sell out of the equipment early.
Are there programs for equipment under $25,000?
Yes. Most partner lenders maintain micro-ticket programs from $5,000 to $25,000 with abbreviated documentation, faster decisioning, and slightly higher rates than mid-range deals. The trade-off is speed for pricing; for time-sensitive small purchases, the micro-ticket route closes in a day or two.
Do I have to insure the equipment for the full loan amount?
Yes. Physical damage coverage at the financed amount is standard, plus liability if applicable to the equipment class. The lender is named as loss payee for the life of the loan. Verify the coverage language meets the lender requirements before funding.
Do I need to disclose other business debt to the lender?
Yes. Lenders calculate debt service coverage on total obligations. Not disclosing material debt can be treated as misrepresentation in the application. Existing business debt is normal and the application accommodates it.
Can a startup with no revenue history finance equipment?
Limited paths, but they exist. Startup programs typically require larger down payment (15 to 30 percent), personal guarantee, and sometimes proof of contract, signed lease, or other evidence the equipment will produce revenue. Personal credit and personal financial strength carry more weight than they would for an established borrower.
Are the rates fixed for the loan term?
Most equipment loans and leases are fixed rate for the full term. Variable-rate equipment financing exists for certain larger transactions but is uncommon under $500,000.

Quick answers

Direct answers to the questions we hear most on equipment depreciation tables applications. Each answer is one we have given to a real buyer in the last quarter.

What is an EFA loan?
An Equipment Finance Agreement (EFA) is a structured equipment loan with a $1 buyout at the end of term. Functionally identical to a loan for tax purposes (you depreciate and own the equipment), but documented as a finance agreement. Most common structure for buyers planning to keep equipment past the financing term.
How long is the typical equipment loan term?
Standard terms are 36, 48, 60, and 72 months. Heavy equipment and long-life industrial equipment often qualify for 84 or 96 month terms. Term length should align with the equipment useful life rather than minimizing monthly payment.
What is a UCC-1 filing?
A UCC-1 financing statement is a public record filed by the lender that establishes a security interest in the financed equipment. It is filed at the Secretary of State (or equivalent) and runs for 5 years. The UCC must be terminated when the loan is paid off, and the borrower is responsible for confirming termination.
Do I need business credit to finance equipment?
No, personal credit is typically the primary factor for small and mid-size businesses. Business credit (D&B PAYDEX, Equifax Business, Experian Business) matters more on larger transactions and for established businesses. Building business credit over time supports better terms on subsequent deals.
Can I finance equipment with a 600 FICO?
Yes. Programs exist for credit profiles below prime, typically requiring 10 to 25 percent down, a personal guarantee, and sometimes a contract or invoice supporting the use. Rates run 4 to 8 points above prime, and term length often caps at 48 months instead of 60 or 72.
Can I finance equipment from a private seller?
Yes, though private-party transactions add documentation requirements. The lender needs proof of clear title transfer, often through a third-party title services provider or escrow. The bill of sale needs to be clean and complete. Some lenders prefer dealer purchases due to documentation simplicity.

How we route the decision

The financing structure that fits depends on the actual situation. Below are the most common decision branches we walk through with buyers, in plain "if X, then Y" form.

If You are buying used equipment over 7 years old
Then Plan for shorter financing terms (36 to 48 months instead of 60 to 72) and higher rates. Authorized refurbished equipment from OEM-direct programs sometimes qualifies for new-equivalent terms.
If You plan to cycle equipment every 36 to 48 months
Then A true operating lease with FMV residual often beats loan or EFA structures. The lower payment over a shorter term, with return option at the end, fits the use case.
If You have access to manufacturer captive promotional financing
Then Compare carefully against bank/independent lender rates. Captive promotions sometimes look better on stated rate but include adjustments (lower discount, required service bundles) that change the net economics.
If You are planning a Section 179 election close to year-end
Then Confirm placed-in-service date can be hit before December 31. Equipment ordered but not delivered/commissioned does not qualify for current-year §179, regardless of payment status.
If Your equipment will be operated by a hired driver or operator
Then Document the operator certification status in advance. Some lenders require proof of OSHA training, CDL, or industry-specific certification before funding on certain equipment categories.

Timeline expectations

What actually happens day-by-day, from application to equipment in service. Most buyers underestimate one or two of these steps; knowing them up front prevents surprises.

Lease end-of-term decision deadline
60 to 90 days before term end
Most lease structures require notice of intent (purchase, return, or renew) 60-90 days before term end. Missing the deadline can trigger automatic renewal or other default consequences.
Refinancing existing equipment loan
2 to 4 weeks
Refinancing requires payoff of existing loan, UCC release from prior lender, and funding of new loan. The UCC release coordination drives most of the timing.
UCC-1 filing and search
Filing: same-day. Search: 1-2 business days
UCC-1 financing statement files electronically same-day in most states. Pre-funding UCC search to confirm no existing liens runs 1-2 business days.
CARB compliance verification (California)
1 to 5 business days
California off-road diesel equipment requires CARB compliance verification. The DOORS database lookup is same-day; full compliance certification for transferred equipment runs days.
Document signing to funding
1 to 3 business days
Lender operations team processes signed docs, files UCC, and funds the seller. Wire transfers funded same-day if processed before cutoff.
Title transfer on titled equipment
1 to 4 weeks
Title transfer through state DMV adds weeks to closing on titled equipment. Out-of-state transfers run on the longer end. Title escrow accelerates this in many cases.

Authoritative sources

The rate ranges, structures, and program details on this page are informed by our partner-lender book and the public industry resources below. We link out so you can verify any specific claim or go deeper.

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Reviewed by

Ed Stapleton Jr.

Founder & Editor

Ed Stapleton Jr. runs Fund My Equipment. Every page on this site is written and reviewed by Ed.

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