Buying equipment, vehicles or software this year? The tax code now lets most businesses deduct the full cost in the year they buy it, instead of spreading it over five, seven or more years. That's a cash-flow benefit you can plan around.
What the 2025 law changed
The One Big Beautiful Bill Act, signed July 4, 2025, did two things:
Restored 100% bonus depreciation, permanently, for qualifying property acquired and placed in service after January 19, 2025. Under the old schedule it would have dropped to 20% in 2026 and zero in 2027.
Raised the Section 179 limit to $2.5 million, indexed for inflation. For 2026 it's $2.56 million, with the deduction phasing out once qualifying purchases pass roughly $4.09 million.
Two tools, different rules
Section 179 | Bonus depreciation | |
|---|---|---|
2026 limit | $2.56 million | No dollar limit |
Can create a loss? | No, capped at business income | Yes, can create a net operating loss |
Choose asset by asset? | Yes | Elect out by asset class |
Phase-out | Yes, dollar for dollar above the threshold | None |
Most businesses apply Section 179 first, then bonus depreciation on what's left. Section 179's flexibility lets you pick exactly how much income to offset; bonus depreciation mops up the rest, even past zero income.
Vehicles
SUVs and trucks with a gross vehicle weight rating above 6,000 pounds escape the strict "luxury auto" caps. Section 179 on heavy SUVs is limited to $32,000 for 2026, but bonus depreciation can cover the remaining cost. A $90,000 qualifying SUV used 100% for business can be written off in full in year one. Business-use percentage must be documented, and it has to stay above 50%.
Pitfalls
State conformity. Several states, including California, don't follow federal bonus depreciation. Your state return may look very different.
Selling later means recapture. If you sell expensed equipment, the gain up to the amount deducted is taxed as ordinary income.
"Placed in service" matters. Buying a machine on December 30 that isn't installed until January doesn't count for this year.
Don't buy just for the deduction. A $100,000 deduction saves you a fraction of $100,000 in tax. Buy what the business needs.
How to claim
Both are claimed on IRS Form 4562, Depreciation and Amortization, filed with your business return.
Planning tip: If you expect higher income next year, it can make sense to take less than the full deduction now. Talk to your CPA before year end, while you can still time purchases.
Unboring is educational content, not tax advice. Figures reflect 2026 IRS inflation adjustments; confirm your situation with a qualified tax professional.
