Section 179 and 100% Bonus Depreciation in 2026: Expensing Equipment, in Plain English
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How we wrote this: A summary of IRS Publication 946, How To Depreciate Property (for 2025 returns, including its "What's New for 2026" section), checked October 29, 2026. This is general information, not tax advice. Depreciation choices interact with the rest of your return, so talk to a tax professional before you decide.
Buy a computer, a truck or shop equipment for your business, and the default is to deduct the cost over several years through depreciation. Two rules let you deduct much more of it up front: the Section 179 deduction and the special depreciation allowance, usually called bonus depreciation. Year-end is when most owners think about them, because what matters is when property is placed in service.
Section 179: the 2026 numbers
IRS Publication 946 lists these limits for tax years beginning in 2026:
| Item | 2025 | 2026 |
|---|---|---|
| Maximum Section 179 deduction | $2,500,000 | $2,560,000 |
| Limit starts shrinking when property placed in service exceeds | $4,000,000 | $4,090,000 |
| Cap for certain heavy SUVs | $31,300 | $32,000 |
Above the threshold, the limit drops dollar for dollar. Pub. 946's example: placing $4,050,000 of machinery in service in 2025 cuts the limit to $2,450,000.
For most small businesses, the dollar limits aren't the constraint. The rules below are.
Rules that decide whether you can use it
- Elect it. Section 179 is an election, made in Part I of Form 4562. You can elect it for part of an item's cost and allocate the deduction among items however you like, within the limits.
- More than 50% business use. If you use property for both business and personal purposes, you can elect Section 179 only if business use is over 50% in the year you place it in service. Then only the business share counts. Pub. 946's example: an $11,000 item used 80% for business has a business cost of $8,800.
- Bought, not inherited. The property must be acquired by purchase. Property you received as a gift or inheritance doesn't qualify.
- The right kind of property. Qualifying property includes tangible personal property, such as machinery and equipment, and off-the-shelf computer software. You can also elect to include certain qualified real property improvements, such as roofs on nonresidential buildings.
- Business income limit. After the dollar limit, the deduction can't exceed your taxable income from the active conduct of a trade or business for the year. Anything disallowed by this limit carries forward to the next year.
That last rule is why Section 179 can't create a loss from your business.
Bonus depreciation is back at 100%
Pub. 946 explains that P.L. 119-21 (the 2025 tax law) reinstated the 100% special depreciation allowance for certain qualified property acquired and placed in service after January 19, 2025. You can elect a smaller 40% allowance instead (60% for long production period property and certain aircraft) for the first tax year ending after January 19, 2025.
Practical differences from Section 179, based on Pub. 946:
- Section 179 applies only if you elect it (Part I of Form 4562). The special allowance applies to qualified property unless you elect out, which you do for a whole class of property for the year by attaching a statement to your return.
- The two can work together. Pub. 946 lists any Section 179 deduction among the items that reduce the basis used to figure the special allowance, and regular depreciation then applies to whatever cost is left.
Smaller purchases: the $2,500 safe harbor
For low-cost items, there's a simpler path. The de minimis safe harbor lets you expense items costing up to $2,500 per invoice or item without depreciation at all. Our de minimis safe harbor guide covers how to elect it.
Year-end questions to ask your tax professional
- Will the equipment be in service (set up and ready to use) by December 31, not just ordered?
- Is business use clearly over 50%, and do you have records to show it?
- Does your expected business income support a large Section 179 deduction, or would bonus depreciation fit better?
- Does your state follow the federal rules for Section 179 and bonus depreciation? Ask, because state treatment can differ from federal.
- Would spreading deductions over several years help more, for example if you expect higher income later?
Deductions also lower the profit that self-employment tax is figured on, and if you drive for business, compare vehicle depreciation with the 2026 standard mileage rate.