If you buy equipment for your business in 2026, bonus depreciation at 100% will often cover the whole cost in year one, and Section 179 is the option you reach for when you want more control over how much you deduct or your state doesn’t follow the federal rules. Both need the same records: cost, date placed in service, and how the asset is used. This article shows how the two differ in 2026, when each one makes sense, and what to write down either way.
Key takeaways
- Bonus depreciation is permanently 100% for qualifying property acquired and placed in service after January 19, 2025, with no dollar or income cap.
- Section 179 for 2026 tops out at $2,560,000, phases out above $4,090,000 of purchases, and is generally limited to your business income.
- Section 179 still earns its place when your state doesn’t follow bonus depreciation or you want to control how much you deduct.
- Either way, the fixed-asset register is what your CPA works from.
Two roads to the same deduction
Say a hypothetical landscaping company with three crews expects about $85,000 of taxable business income in 2026 before any equipment write-offs. In August it buys a $96,000 mini excavator and $44,000 of mowers and trailers, all in service by September. That’s $140,000 of equipment and two ways to deduct it in a single year.
Section 179 is an election: you choose which assets, and how much of each, to expense. Bonus depreciation is the default, generally applying to qualifying property unless you opt out. On this purchase the two look alike on paper. They stop looking alike when you ask what your income can absorb.
Section 179 in 2026: limits, phase-out, and the income cap
For 2026 the maximum Section 179 deduction is $2,560,000, and it begins to phase out once you place more than $4,090,000 of qualifying property in service. The SUV cap is $32,000. For 2025 those figures were $2,500,000, $4,000,000, and $31,300. The 2026 numbers are in Rev. Proc. 2025-32.
For most small businesses the dollar cap is far away. The limit you’re more likely to hit is the income cap. Section 179 is generally limited to the taxable income from your business, and what you can’t use is typically carried forward. In the landscaping example, $85,000 could be expensed this year, with $55,000 waiting for next year. IRS Publication 946 explains how the limits and carryforward work, and your CPA will confirm how they apply to you.
Bonus depreciation: 100%, permanent, no income cap
Bonus depreciation is now permanently 100% for qualifying property acquired and placed in service after January 19, 2025, as Warren Averett’s breakdown explains. It has no dollar limit and no income cap, so it can push a business into a loss for the year. In the landscaping example, 100% bonus on $140,000 of equipment against $85,000 of income leaves a $55,000 loss on paper. Whether that loss helps depends on what else is on your return and what you expect next year, which is a question for your CPA, not a rule of thumb.
One edge case: property under a binding contract before January 20, 2025 stays on the old phase-down, which is 20% for 2026. If you signed a binding contract for a machine in late 2024 and it arrives this year, that’s where the old schedule still applies. For the wider picture, see our overview of the 2025 tax law and what it means for small businesses in 2026.
Side by side
Here are the differences that matter most in practice.
| Section 179 | Bonus depreciation | |
|---|---|---|
| 2026 amount | Up to $2,560,000 | 100% of cost, no dollar cap |
| Phase-out | Begins above $4,090,000 of purchases | None |
| Income cap | Generally your business income; excess carries forward | None; can create a loss |
| Choosing assets | Asset by asset, and amount by amount | Generally by property class, unless you opt out |
| Heavy SUVs | Capped at $32,000 | Can cover the rest when business use exceeds 50% |
| State treatment | Varies by state | Varies by state, and some states don’t follow it |
As a rule of thumb, when your income comfortably exceeds what you’re buying and your state follows the federal rules, the two produce the same first-year result and the choice is mostly paperwork. The differences start to matter when income is thin, states diverge, or you want to hold some deductions for later years.
When Section 179 still wins
Three situations tilt toward Section 179 even with bonus at 100%.
The first is state conformity. Some states don’t follow federal bonus depreciation, and some handle Section 179 differently, so your state return can tell a different story than your federal one. Ask your CPA which rules apply where you file.
The second is control. Because you choose how much to expense, you can match the deduction to your income instead of creating a loss you may not be able to use. The landscaping company could elect $85,000 under Section 179 and, with its CPA, depreciate the rest normally by opting out of bonus for that class of property.
The third is selectivity. Bonus generally sweeps in everything in a property class unless you opt out, while Section 179 lets you pick the excavator and leave the trailers to regular depreciation. If next year looks like a bigger income year, that flexibility can be worth having.
Vehicles under each
Passenger vehicles have annual caps that apply whichever method you use. For 2026 the first-year cap is $20,300 if you claim bonus and $12,300 if you don’t. Year two is $19,800, year three is $11,900, and later years are $7,160, according to the Journal of Accountancy. Say a hypothetical sedan costs $45,000 and is used only for business. Year one takes $20,300, year two takes $19,800, and year three takes the last $4,900.
Heavy SUVs, meaning those over 6,000 pounds gross vehicle weight rating, work differently. Section 179 is limited to $32,000, but 100% bonus can cover the rest when business use is over 50%. A hypothetical $74,000 SUV used 80% for business has a $59,200 business basis: $32,000 through Section 179 and the remaining $27,200 through bonus, so the whole amount is deductible in year one. Either way, a mileage log and a business-use percentage are what hold it up.
Bookkeeping: the fixed-asset register either way
Whichever method you choose, the paperwork starts with a fixed-asset register: every asset with its description, cost, purchase date, placed-in-service date, business-use percentage, and the method your CPA elects. Form 4562 draws on exactly that information, and Publication 946 explains the rules behind it. A register built as you buy is a small habit. One rebuilt in March from bank statements is a project.
Record equipment as an asset rather than an everyday expense, and keep the invoice and delivery date with the entry. How your ledger shows depreciation is worth settling with your CPA, but the register itself is not optional. Run it against the Year-End Bookkeeping Checklist before you send anything over. If you’re planning a purchase before December 31, Should You Buy Equipment Before Year-End? covers the placed-in-service rules, and the 12 year-end tax planning moves show where equipment fits with everything else.
Frequently asked questions
Can I use Section 179 and bonus depreciation on the same purchase?
Generally yes, on different portions of the cost. Section 179 is typically applied first to the amount you elect, and bonus can then apply to the qualifying cost that remains. The heavy SUV example above works that way. Your CPA decides the mix when the return is prepared.
Does the December 31 deadline mean paid or placed in service?
Placed in service, meaning ready and available for use. For a 2026 deduction, that date is December 31, 2026. A machine you order in December but that isn’t delivered and set up until January belongs to next year.
What should I bring to my CPA before year-end?
Your fixed-asset register, the invoices with delivery dates, and a note on business use for any vehicle. Ask four things: which state rules apply, whether to opt out of bonus for any asset class, how much Section 179 to elect given your expected income, and how your vehicles are classified.
Where to go from here
Start with the list of what you’ve bought and when it went into service; the method decision comes after. If you’d rather hand the tracking off, that’s what a BooXkeeping team is for, and a free consultation is an easy way to see what a year-end close with a clean asset register looks like.
Reviewed for tax year 2026.
BooXkeeping is a bookkeeping company, not a CPA firm or a law firm. This article is general information for business owners, not tax, legal, or financial advice. Rules change and your situation is specific, so confirm anything here with your CPA or attorney before acting on it.