Section 179 vs. Bonus Depreciation: Which is Better for Your Business?

The Power of First-Year Deductions

In the world of tax planning, "a dollar today is worth more than a dollar tomorrow." This is why Section 179 and Bonus Depreciation are two of the most popular strategies for small to mid-sized businesses. Both allow you to bypass the traditional multi-year MACRS schedule and write off a massive portion (or all) of an asset's cost in the very first year.

What is Section 179?

Section 179 is an immediate expense deduction that allows you to deduct the full purchase price of qualifying equipment and software. It was designed specifically to help small businesses grow.

• 2026 Limit: $2,560,000, per IRS Revenue Procedure 2025-32.
• Spending Cap: The benefit begins to phase out if you purchase more than $4,090,000 in equipment.
• Heavy vehicles: SUVs with a GVWR over 6,000 lbs are capped at $32,000 for 2026 — see our heavy vehicle Section 179 guide for the full eligibility rules.
• Benefit: You can choose exactly which assets to apply it to, down to the dollar.

What is Bonus Depreciation?

Bonus depreciation is another form of accelerated depreciation. Unlike Section 179, it doesn't have a dollar-for-dollar limit, but it typically applies to specific classes of "new" or "used" property with a recovery period of 20 years or less.

The OBBBA Impact: Under previous laws, bonus depreciation was scheduled to drop to 60% in 2024 and 40% in 2025. However, the **One Big Beautiful Bill Act (OBBBA)** permanently restored **100% Bonus Depreciation** for assets placed in service after January 19, 2025.

Key Differences at a Glance

Which One Should You Choose?

Most tax professionals recommend using **Section 179 first** for its flexibility. Since Section 179 cannot create a business loss (it can only zero out your income), you use it to minimize your tax liability to $0. If you still have equipment costs remaining after reaching the Section 179 limit, you then apply **Bonus Depreciation** to the remainder.

Because Bonus Depreciation *can* create a net operating loss (NOL), it is a powerful tool if you need to carry back a loss to a previous year to get a refund of taxes already paid.

Summary and Recommendations

1. Check your spending: If you spend less than $2.56M, Section 179 covers everything.
2. Consider profitability: If you are having a "down" year but bought equipment, Bonus Depreciation is your only way to claim a deduction that creates a loss.
3. Look at the OBBBA rules: Ensure your equipment was placed in service after January 19, 2025 to qualify for the 100% bonus rate.