Section 179 and Bonus Depreciation: 2025 and 2026 Rules

The short answer

When you buy equipment, computers, furniture, or other business property that lasts more than a year, you generally depreciate it — deduct the cost over several years. Two rules can let you deduct much or all of the cost in the first year instead:

• Section 179: an election to expense qualifying property, up to an annual dollar limit and your business income.
• Bonus (special) depreciation: an additional first-year deduction for qualified property — 100% for property acquired and placed in service after January 19, 2025.

The limits: 2025 vs. 2026

The 2025 amounts are from Publication 946 (2025); the 2026 section 179 amounts are from Revenue Procedure 2025-32. The 2025 tax law (P.L. 119-21, section 70301) made the 100% special depreciation allowance permanent for property acquired after January 19, 2025, as described in Notice 2026-11. Under that notice, property is not treated as acquired after the date a written binding contract for it was entered into.

Who and what qualifies

• Section 179 property must be acquired for use in your trade or business — for example, machinery and equipment, off-the-shelf computer software, and certain qualified real property. Property held only to produce income, such as investment property, does not qualify.
• More than 50% business use: for property used for both business and personal purposes, you can elect section 179 only if business use is more than 50% in the year you place it in service, and only for the business percentage.
• Business income limit: the section 179 deduction cannot exceed your taxable income from the active conduct of any trade or business; any excess carries forward.
• Bonus depreciation applies to qualified property — generally tangible property with a recovery period of 20 years or less, certain computer software, and other listed categories — and can be new or certain used property. Listed property used 50% or less for business does not qualify.
• Electing out: bonus depreciation applies unless you elect out for a class of property.

Examples (illustrative)

2025 — full write-off of a computer: Leo, a sole proprietor, buys a $12,000 computer system in March 2025 and uses it only for his business. Because he acquired and placed it in service after January 19, 2025, it can qualify for 100% bonus depreciation, and he could also choose section 179. Either way, he can generally deduct the full $12,000 for 2025.

Partly personal use: Rosa buys a $5,000 camera and uses it 70% for her business. Because business use is more than 50%, the business part of the cost — $3,500 ($5,000 × 70%) — can be used for section 179.

2026 — phase-out: A business places $4,200,000 of section 179 property in service in 2026. That is $110,000 over $4,090,000, so its section 179 limit falls from $2,560,000 to $2,450,000.

Common mistakes

• Using the purchase date alone. The rules depend on when property was acquired (including written binding contracts) and when it was placed in service.
• Claiming section 179 on property used 50% or less for business.
• Deducting the personal-use share. Only the business percentage counts.
• Expecting section 179 to create a loss. It is limited to business taxable income; the rest carries forward.
• Forgetting recapture if business use later drops to 50% or less.
• Assuming every vehicle is fully deductible. SUVs and passenger automobiles have special caps.

IRS forms and filing

California considerations

States do not always follow federal depreciation rules. AskLinTax has not verified California's current treatment of section 179 and bonus depreciation against Franchise Tax Board sources for this guide, so this guide does not state it. Check the California Franchise Tax Board before relying on federal amounts for a California return.