Section 179 vs bonus depreciation in 2026: writing off business equipment

Normally a business deducts the cost of equipment slowly, a slice each year over the asset's recovery period. Two provisions let it deduct much more, or all, of the cost in the year the asset goes into service: the section 179 deduction and the special depreciation allowance, usually called bonus depreciation. For 2026 both are large enough to cover most small businesses' purchases in full, so the choice is less about how much you can deduct and more about control, timing and income. This page compares them and walks through an example.

Bonus depreciation in 2026

For property acquired and placed in service after January 19, 2025, the 2025 tax law (P.L. 119-21) restored a permanent bonus depreciation rate of 100%. ^{1 4}

What it covers: tangible property depreciated under MACRS with a recovery period of 20 years or less (equipment, machinery, vehicles, furniture, computers, and qualified improvement property, which is 15-year property), plus certain software and a few other categories. ¹ It applies to new property and to certain used property. ¹

How it works:

• It's automatic. Unless you elect out, you must take it. ¹
• You elect out by class, not by asset. The election covers all property in a class (for example, all five-year property) placed in service that year. ¹
• No dollar cap and no income limit. It can be larger than your business income and create a loss, which other rules may then limit.

Section 179 in 2026

Section 179 lets you elect to deduct the cost of qualifying property as an expense instead of depreciating it. For tax years beginning in 2026: ^{1 3}

• the maximum deduction is $2,560,000;
• that limit shrinks dollar for dollar once the cost of section 179 property you place in service in the year passes $4,090,000;
• for sport utility vehicles the most you can expense is $32,000.

The rules that make it different:

• It's elective, asset by asset, and you can choose to expense only part of an asset's cost. You make the election on Form 4562. ²
• Business income limit. The deduction can't exceed the taxable income from the active conduct of your trades or businesses for the year. Any amount you can't deduct carries forward to later years. ¹
• More than half business use. For property used both for business and personally, you can take section 179 only if business use is more than half in the year you place it in service, and only on the business share. ¹
• Recapture. If business use later falls to half or less during the recovery period, part of the deduction comes back as ordinary income. ¹
• Some building improvements qualify. You can elect to treat qualified improvement property, and roofs, heating and air-conditioning, fire protection and alarm systems, and security systems added to nonresidential buildings, as section 179 property. ¹
• Not for investment property. Property used only to produce income, such as rental property when renting isn't your trade or business, doesn't qualify. ¹

The order they apply in

Section 179 comes first, then bonus depreciation on what's left of the cost, then regular MACRS depreciation on anything remaining. ¹ So a business can expense part of an asset under section 179 and let bonus depreciation take the rest.

Which to use

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With bonus depreciation at 100%, many businesses never need section 179 for equipment. Section 179 still earns its place when you want precision: expensing only some assets, or part of one, to land income where you want it. For example, you might want to avoid wasting deductions in a low-income year or keep income up for the qualified business income deduction. It also matters for the nonresidential building improvements that bonus depreciation doesn't reach. Bonus depreciation is the tool when you want the whole write-off even if it creates a loss.

Two cautions. First, writing off an asset now leaves nothing to deduct later, and selling it generally turns the earlier deductions into ordinary income. Second, many states don't follow the federal bonus depreciation rules, and some cap section 179 lower, so the state return can look quite different.

What to gather

• Invoices showing the cost and the date each asset was acquired and placed in service.
• For vehicles and mixed-use property, a log of business use.
• Last year's Form 4562, for any section 179 carryover.
• Your state's conformity rules for both provisions.