Can a Trust Take the Section 179 Deduction?

The Section 179 deduction allows businesses to expense the full purchase price of qualifying equipment and software in the year it is placed in service. Instead of capitalizing an asset and depreciating it over several years, a business can write off the entire cost in the current tax year, which can significantly lower its taxable income. The question for trustees and beneficiaries is whether a trust can take advantage of this deduction.

General Eligibility for the Section 179 Deduction

The ability to claim the Section 179 deduction is limited to specific taxpayers. The tax code permits businesses structured as C corporations, S corporations, partnerships, and sole proprietorships to utilize this tax break. These entities can elect to expense the cost of qualifying property, such as machinery, computers, and office furniture, subject to annual dollar limitations. For the 2025 tax year, the maximum deduction is $1,250,000, which begins to phase out if the total cost of property placed in service exceeds $3,130,000.

The tax code generally excludes trusts and estates from being eligible to claim the Section 179 deduction directly. This ineligibility is a direct rule outlined in tax regulations, not a matter of interpretation. Therefore, a trust itself cannot purchase a qualifying asset and make the election on its fiduciary income tax return, Form 1041.

The Pass-Through Exception for Beneficiaries

A different scenario arises when a non-grantor trust holds an ownership interest in a pass-through business, such as a partnership or an S corporation. In this structure, the business entity itself calculates the Section 179 deduction at the entity level. The partnership or S corporation makes the election to expense qualifying property on its own tax return. This information is then allocated to its owners, including the trust, and reported on a Schedule K-1.

The deduction attribute retains its character and flows through the trust to the ultimate beneficiaries. The trust will issue its own Schedule K-1 to each beneficiary, passing on their respective share of the Section 179 expense.

The beneficiaries, upon receiving their K-1s from the trust, may then be able to claim the deduction on their personal income tax returns, such as Form 1040. Their ability to use the deduction is subject to their own individual limitations, including having sufficient business income.

The Grantor Trust Distinction

Grantor trusts operate under a different set of tax rules that impact Section 179 eligibility. A grantor trust is a “disregarded entity” for federal income tax purposes. This means its income, deductions, and credits are reported directly on the personal tax return of the individual who created the trust, known as the grantor.

Because the trust entity is disregarded, if a business owned by the grantor trust purchases qualifying property, the Section 179 deduction is not considered by the trust at all. Instead, the grantor is treated as the direct owner of the business and its assets for tax purposes. Consequently, the grantor claims the Section 179 deduction on their own individual tax return, Form 1040, as if they had purchased the property themselves. This distinction is based on the principle that the grantor has retained control over the trust’s assets, making them the effective taxpayer.