Section 179 vs Bonus Depreciation in 2026

For 2026, both Section 179 and bonus depreciation can let you deduct the full cost of qualifying equipment in the year you place it in service. Section 179 is capped at $2,560,000 (phasing out above $4,090,000 of purchases) and can't exceed your business income, but you choose it asset by asset. Bonus depreciation is 100% for property acquired after January 19, 2025, has no dollar cap and no income limit, and applies automatically unless you elect out. Many businesses use both.

All figures are for the 2026 tax year and will be updated when the IRS publishes new numbers.

The two side by side

Both are covered in IRS Publication 946 and claimed on Form 4562.

How Section 179 works

Section 179 lets you treat the cost of qualifying property as an expense instead of depreciating it over years. Qualifying property includes machinery, computers, office furniture, off-the-shelf software, many vehicles, and certain improvements to nonresidential buildings. The property must be used more than 50% for business, and only the business-use share counts.

Two limits apply:

How bonus depreciation works

The One, Big, Beautiful Bill Act restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, and made it permanent. Qualifying property generally means assets with a recovery period of 20 years or less, including used property you haven't used before. Because there's no income limit, bonus depreciation can create a net loss, which may then offset other income or carry forward, subject to loss limits.

Bonus applies to every asset in a class unless you elect out for that class, so you can't pick and choose individual assets the way you can with Section 179. Property acquired under a binding contract before January 20, 2025 may be treated differently, so confirm dates.

Example 1: plenty of income

A sole proprietor in the 24% bracket buys $60,000 of equipment, used 100% for business, with $150,000 of business income. Section 179 deducts all $60,000, saving about $14,400 of federal income tax. Bonus depreciation would give the same first-year deduction. Either works; Section 179 gives more control if you want to deduct only part.

Example 2: income is too low for Section 179

A business buys $120,000 of equipment but has only $50,000 of business income.

Whether the loss is better than a carryforward depends on your other income, your bracket now versus later, and loss rules. Some businesses use Section 179 up to their income and let bonus cover the rest.

Example 3: a very large buyer

A company places $4,300,000 of property in service. That's $210,000 over the phase-out start, so its Section 179 limit drops to $2,350,000. The remaining cost can still qualify for 100% bonus depreciation.

Vehicles and the heavy SUV limit

Vehicles have their own rules:

Example: a business owner buys an $80,000 heavy SUV and uses it 80% for business. The business basis is $64,000. Section 179 can cover up to $32,000. Bonus depreciation can cover the remaining $32,000, so the full $64,000 could be deducted in 2026. At a 24% rate, that's about $15,360 of federal income tax saved. Keep a mileage log: if business use drops to 50% or less in a later year, part of the deduction is recaptured as income.

Note that the Section 179 Calculator applies the general dollar limit, phase-out, business-use and income limits, but not the SUV cap or luxury auto limits, so adjust for those yourself.

Which should you use?

A big first-year deduction reduces future depreciation and can raise tax when you sell the asset (depreciation recapture). Buying equipment only for the deduction rarely makes sense: you still spend the money.

When to talk to a CPA or enrolled agent

Talk to a CPA or enrolled agent before year-end if you're buying a vehicle, making large purchases near the phase-out, considering a deduction that would create a loss, own a partnership or S corp interest (Section 179 limits apply at both the entity and owner level), or file in a state that doesn't follow federal rules.

Related guides

Big deductions change your quarterly payments, so see quarterly estimated taxes 2026. If you're weighing an entity change at the same time, read S corp vs LLC: when the election saves tax. For larger companies, see corporate tax planning strategies.

Estimate your deduction and tax savings with the Section 179 Calculator.

This guide is general information, not tax advice. Figures are for the 2026 tax year and will be updated as the IRS releases new figures.