Gifts & business · calculator
Bonus depreciation and section 179 in 2026
Two ways to deduct business equipment in the year you buy it, both enlarged by the 2025 law.
First-year write-off of business equipment
Deductible in the first year
$180,000
Section 179, then 100% bonus depreciation on any rest
- Section 179 limit after the phase-out$2,560,000
- Expensed under section 179$180,000
- Bonus depreciation$0
Section 179 is also limited to business taxable income; bonus depreciation is not. Heavy SUVs have a separate section 179 cap.
Bonus depreciation lets a business deduct the cost of qualified property, such as machinery, equipment, computers and many vehicles, in the year it is placed in service instead of over several years. Section 70301 of Public Law 119-21 made it permanent at 100% for property acquired after January 19, 2025. For the first tax year ending after that date, a business can elect 40% instead (60% for long production period property). Section 179 works alongside it: for 2026 a business can expense up to $2,560,000 of qualifying property, a limit reduced dollar for dollar once total section 179 property placed in service exceeds $4,090,000 (Rev. Proc. 2025-32 section 4.24; $2,500,000 and $4,000,000 for 2025). A sport utility vehicle is capped at $32,000 under section 179. A company that places $4,500,000 of equipment in service in 2026 keeps a section 179 limit of $2,150,000, and bonus depreciation can take the rest. Section 179 cannot exceed business taxable income; bonus depreciation can create a loss.
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The 2026 and 2025 numbers
| Item | 2025 | 2026 |
|---|---|---|
| Section 179 maximum | $2,500,000 | $2,560,000 |
| Phase-out begins at property placed in service of | $4,000,000 | $4,090,000 |
| Section 179 cap for an SUV | see Rev. Proc. 2024-40 | $32,000 |
| Bonus depreciation, property acquired after January 19, 2025 | 100% (or 40% elected) | 100% |
How the two deductions combine
On Form 4562, section 179 is applied first to the assets you choose, up to the limit and to business taxable income. Bonus depreciation then applies to the remaining cost of qualified property, and regular MACRS depreciation to whatever is left. For a contractor buying a $180,000 excavator in 2026, section 179 alone can cover it; for a manufacturer placing $4,500,000 of machines in service, the section 179 limit falls to $2,150,000 and $2,350,000 goes to bonus depreciation.
What qualifies
Tangible property with a recovery period of 20 years or less, off-the-shelf software and qualified improvement property generally qualify for bonus depreciation; used property qualifies if the business did not use it before. Section 179 covers machinery, equipment, vehicles, furniture, software and certain improvements to nonresidential buildings such as roofs, HVAC and security systems. Land and most buildings never qualify. Passenger cars remain subject to the yearly luxury auto limits even with bonus depreciation.
Individuals and the new car deduction
A sole proprietor claims these deductions on Schedule C, which lowers business income for both income tax and self-employment tax. A vehicle used partly for the business and partly at home splits its depreciation, and the personal share of interest on a new US-assembled car may fall under the separate car loan interest deduction. The QBI deduction is then computed on the lower business income.
Sources: IRS: Working Families Tax Cuts, provisions for businesses (sections 70301 and 70306); IRS Rev. Proc. 2025-32: 2026 inflation-adjusted items and 2025 items modified by Public Law 119-21 (October 9, 2025); Public Law 119-21 (July 4, 2025), Title VII, Subtitle A: sections 70101 to 70120 and 70424 to 70425, read on October 11, 2026.