The IRS released its tax year 2027 inflation adjustments on November 5, 2026, raising the Section 179 expensing limit to $2.64 million and adjusting the qualified small business stock exclusion cap for inflation for the first time. The changes, set out in Revenue Procedure 2026-35, also move qualified business income thresholds and small employer benefit limits.
Key Takeaways
- The Section 179 expensing limit rises to $2,640,000 for tax year 2027, from $2,560,000, and begins phasing out once qualifying property placed in service exceeds $4,230,000.
- The qualified small business stock (QSBS) per-issuer gain exclusion cap rises to $15,480,000, its first inflation adjustment, and the gross assets ceiling rises to $77,390,000.
- Qualified business income (QBI) deduction limits begin phasing in at $416,600 of taxable income for joint filers and $208,300 for most other filers.
- Small employers can reimburse up to $6,700 for self-only coverage and $13,550 for family coverage through a QSEHRA in 2027.
- The monthly limit for qualified transportation fringe benefits and qualified parking rises to $350.
- The adjustments cover almost 70 provisions and generally apply to tax returns filed in 2028.
Revenue Procedure 2026-35 Sets the 2027 Numbers
The Internal Revenue Service published Revenue Procedure 2026-35 alongside news release IR-2026-133 on November 5, 2026. The document adjusts almost 70 tax provisions for inflation for tax year 2027, and the new figures generally apply to returns filed in 2028. The seven ordinary income tax rates are unchanged; the income thresholds for each bracket rise.
For business owners, the provisions that matter most sit outside the bracket tables. IRS Chief Executive Officer Frank J. Bisignano pointed to that in the release, noting that businesses will see “a boost to the amount that can be expensed by businesses.” The table below compares the key business-owner limits.
| Provision | 2026 | 2027 |
|---|---|---|
| Section 179 expensing limit | $2,560,000 | $2,640,000 |
| Section 179 SUV limit | $32,000 | $33,100 |
| QSBS per-issuer exclusion cap | $15,000,000 | $15,480,000 |
| QSBS gross assets ceiling | $75,000,000 | $77,390,000 |
| QSEHRA self-only / family | $6,450 / $13,100 | $6,700 / $13,550 |
| Transportation fringe and parking (monthly) | $340 | $350 |
Section 179 Expensing Rises to $2.64 Million
Section 179 lets businesses deduct the cost of qualifying equipment and other property in the year it is placed in service, rather than depreciating it over several years. For tax year 2027, the maximum deduction rises to $2,640,000, up $80,000 from 2026. The separate limit for sport utility vehicles rises to $33,100 from $32,000.
The limit is reduced dollar for dollar once the total cost of qualifying property placed in service during the year exceeds $4,230,000. Section 179 operates alongside the permanent return of 100% bonus depreciation, which has no annual dollar cap, so many businesses weigh the two provisions together when planning capital spending.
QBI Deduction Thresholds Move Up for Pass-Through Owners
Owners of sole proprietorships, partnerships and S corporations may qualify for the 20% qualified business income deduction under Section 199A. For 2027, the limitations on that deduction begin phasing in at $416,600 of taxable income for married couples filing jointly, with the phase-in range ending at $566,600. For most other filers, the threshold is $208,300, with the range ending at $283,300. Married individuals filing separately have a threshold of $208,325, phasing in through $283,325.
The QSBS Exclusion Cap Is Indexed for the First Time
The change with the most significance for founders and early investors is in Section 1202. For qualified small business stock acquired after July 4, 2025, the per-issuer gain exclusion cap rises to $15,480,000 in 2027, up from the statutory $15,000,000. The aggregate gross assets ceiling that a corporation must stay under to qualify as a qualified small business rises to $77,390,000 from $75,000,000. This is the first year both figures have been adjusted for inflation, following the 2025 change in law that indexed them for years after 2026.
Small Employer Benefit Limits Rise
Small employers that offer a qualified small employer health reimbursement arrangement (QSEHRA) can provide up to $6,700 for self-only coverage and $13,550 for family coverage in 2027, up from $6,450 and $13,100 in 2026. The monthly limit for qualified transportation fringe benefits, which covers transit passes and commuter vehicles, and for qualified parking rises to $350, up $10 from 2026.
Other 2027 Figures Business Owners Track
The standard deduction rises to $33,200 for married couples filing jointly and $16,600 for single filers. Self-employed owners will also see the 2027 Social Security taxable maximum of $192,300 apply to their earnings next year. Businesses financing equipment purchases may also be working under the SBA’s updated 7(a) and 504 lending rules for fiscal 2027.
FAQs
What Is the Section 179 Limit for 2027?
The Section 179 expensing limit is $2,640,000 for tax year 2027, up from $2,560,000 in 2026. It phases out dollar for dollar once qualifying property placed in service exceeds $4,230,000.
What Is the QSBS Exclusion Cap for 2027?
For qualified small business stock acquired after July 4, 2025, the per-issuer gain exclusion cap is $15,480,000 in 2027. It is the first year the cap has been adjusted for inflation.
What Are the 2027 QBI Deduction Thresholds?
The QBI deduction limitations begin phasing in at $416,600 of taxable income for joint filers and $208,300 for most other filers, with phase-in ranges ending at $566,600 and $283,300.
When Do the 2027 Tax Adjustments Apply?
The adjustments apply to tax year 2027 and generally affect tax returns filed in 2028.
