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Section 179 is an optional deduction limited by annual dollar caps, an investment phaseout, and active-business income; bonus depreciation is a separate first-year allowance that generally applies to eligible property unless you elect out. You may use both provisions on qualifying equipment, but the answer depends on the asset, its acquisition and placed-in-service dates, its business-use share, and your tax situation. Neither deduction is a tax credit, and neither automatically makes a purchase worthwhile.
How Section 179 and bonus depreciation differ
| Question | Section 179 | Bonus depreciation |
|---|---|---|
| What is it? | An election to expense all or part of the cost of eligible property in the year it is placed in service. | A special first-year depreciation allowance under Internal Revenue Code section 168(k) for qualifying property. |
| How does it apply? | You choose whether to claim it and how much eligible cost to expense, subject to the annual limit and business-income limit. | It generally applies automatically to eligible property unless you elect out under the applicable rules. |
| Key limits | Annual dollar cap, phaseout based on total eligible property placed in service, and active-business-income limit. | Eligibility rules and the percentage for the property’s acquisition and placed-in-service dates; election-out rules apply. |
| Can unused deduction carry forward? | Amounts limited by the business-income cap may generally be carried forward. | Not the same Section 179 income-limit carryforward; the treatment depends on the applicable depreciation rules. |
Both are federal tax deductions that reduce the amount of qualifying cost recovered through depreciation. A deduction does not reduce tax dollar for dollar: its tax effect depends on the taxpayer’s circumstances. The total depreciation deductions cannot exceed the property’s cost basis.
What the 2025 and 2026 limits mean
Section 179’s federal limits vary by tax year. The figures below apply to the stated years and do not determine how a state treats the deduction.
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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →| Tax year beginning | General Section 179 maximum | Investment phaseout begins above | Maximum deduction for qualifying SUVs |
|---|---|---|---|
| 2025 | $2,500,000 | $4,000,000 | $31,300 |
| 2026 | $2,560,000 | $4,090,000 | $32,000 |
The Internal Revenue Service says the general Section 179 maximum is reduced by the amount eligible property placed in service exceeds the applicable phaseout threshold. The SUV figures are specific maximums for qualifying SUVs, not a general equipment limit. See the IRS Publication 946 for the applicable tax year and property rules.
When bonus depreciation is 100% in 2025—and when it is not
Do not treat every asset placed in service during 2025 as eligible for the same bonus percentage. Under current IRS guidance, certain qualified property acquired and placed in service after January 19, 2025 receives a 100% special depreciation allowance unless the taxpayer elects out. The acquisition date and placed-in-service date both matter.
- Acquired and placed in service after January 19, 2025: Certain eligible property may qualify for the 100% allowance.
- Acquired before January 20, 2025, and placed in service during 2025: Certain qualifying property generally remains subject to a 40% allowance; specified long-production-period property and aircraft may qualify for 60%.
These percentages are subject to property eligibility and exceptions. Bonus depreciation can cover specified tangible MACRS property with a recovery period of 20 years or less, certain software, and other qualifying categories; certain used property may qualify as well. The IRS explains the categories and conditions in Publication 946 and its business tax changes overview.
Can you claim both deductions on the same equipment?
Sometimes. Section 179 can be elected for eligible cost, and depreciation rules—including bonus depreciation where applicable—may then apply to remaining basis. You cannot deduct more than the property’s cost, and an asset does not qualify for every method simply because the methods can interact.
The IRS uses a business computer to illustrate the alternatives: a taxpayer may elect Section 179 for qualifying cost within the applicable limit, recover remaining eligible cost with additional first-year depreciation, or use regular depreciation. Its regular-depreciation example uses a five-year recovery period. This is an illustration, not a determination that a particular computer qualifies or a recommendation to buy one. See the IRS depreciation and amortization FAQ.
How to evaluate which approach fits
- Identify the asset and business-use share. Check whether the property meets Section 179 or bonus-depreciation requirements. Personal use can restrict deductions, and listed property has additional requirements.
- Record both relevant dates. Determine when the property was acquired and when it was placed in service. This is essential for applying the 2025 bonus-depreciation transition.
- Check the Section 179 limits for the tax year. Account for both the annual dollar limit and the total cost of eligible property placed in service, then consider the active-business-income limit.
- Compare the elections and remaining basis. Decide whether to elect Section 179 for all or part of eligible cost, whether to elect out of bonus depreciation where permitted, and how remaining basis is treated under applicable depreciation rules.
- Review future use and filing requirements. Business use falling to 50% or less during the recovery period can trigger Section 179 recapture. Section 179 elections and depreciation are reported using Form 4562; consult the instructions and Publication 946 for the relevant year.
Limits that can change the result
Section 179 is limited by business income
Even when eligible purchases are within the annual dollar cap, the active-business-income limit can restrict the current-year Section 179 deduction. Amounts disallowed by that limit may generally carry forward. You can also elect to expense less than the maximum available amount.
Business use and recapture matter
Property used partly for personal purposes may have restricted deductions. If business use of property subject to Section 179 falls to 50% or less during its recovery period, recapture may apply. Listed property has special requirements, so do not assume a purchase qualifies based only on its business purpose.
Federal rules are not the whole tax picture
The limits and percentages described here are federal guidance. State conformity and local rules may differ, and the effect for a particular owner can depend on the entity, the tax year, income, and other facts. For a fact-specific decision, get help comparing Section 179 and bonus depreciation from a tax professional.
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