Bonus Depreciation vs Section 179: Which Is Better in 2026?
Section 179 and bonus depreciation both let you deduct equipment costs in Year 1, and they are often used together. But they have different rules — and after legislation signed in 2025 restored 100% bonus depreciation permanently, the choice matters less than it used to. Here is how they compare.
Side-by-side comparison
| Section 179 | Bonus depreciation | |
|---|---|---|
| 2026 first-year rate | 100% (up to the cap) | 100% (permanent) |
| Dollar cap | $2,560,000, phasing out above $4,090,000 placed in service | No cap |
| Used property | Yes, if new to your business | Yes, if new to your business |
| Can it create a loss? | No — limited to taxable income (excess carries forward) | Yes |
| Elective? | Yes — you choose asset by asset | Automatic by asset class (you can elect out) |
| State conformity | Most states follow it | Many states decouple — check yours |
How they stack together
You do not have to choose just one. The standard order is:
- Section 179 first, up to its dollar cap (and the $32,000 SUV cap for heavy SUVs)
- Bonus depreciation on whatever basis is left
- Regular MACRS depreciation on anything remaining
With 100% bonus depreciation permanent, step 2 now covers the entire remainder — so for most businesses, the combined result is a full Year 1 write-off regardless of which bucket does the work.
When Section 179 wins
- You want asset-by-asset control — expense this machine now, depreciate that one later
- You want to avoid creating a loss you cannot use this year
- Your state fully conforms to Section 179 but decouples from bonus depreciation
When bonus depreciation wins
- Your purchases exceed the Section 179 cap or phase-out threshold
- You can use a loss this year (or carry it)
- You want simplicity — it applies automatically within an asset class
See both applied to your purchase.
Our calculators apply Section 179 first, then bonus depreciation — exactly like the IRS ordering rules.
Open the Equipment Calculator