For two years the practical advice on equipment purchases was "use Section 179, because bonus depreciation is phasing out." That advice is now wrong. The One Big Beautiful Bill Act restored 100% bonus depreciation permanently for property acquired after January 19, 2025, and raised the Section 179 limits at the same time. Both routes will write off most purchases in full in the first year. The question is no longer which one gets you there, but which one gets you there with the fewest side effects, and whether writing it all off this year is the right idea at all.
What each one is
Section 179 is an election to expense the cost of qualifying property in the year it is placed in service instead of depreciating it. For 2026 the maximum deduction is $2,560,000, reduced dollar for dollar once the total cost of Section 179 property placed in service in the year exceeds $4,090,000. It applies to tangible personal property (equipment, machinery, furniture, vehicles, computers), off-the-shelf software, qualified improvement property, and, for nonresidential buildings, roofs, HVAC, fire protection and security systems. You choose which assets to expense and how much of each.
Bonus depreciation under Section 168(k) is an additional first-year deduction that applies automatically to qualifying property unless you elect out. It covers new or used property with a MACRS recovery period of 20 years or less, computer software and qualified improvement property. For property acquired and placed in service after January 19, 2025 the rate is 100%, with no dollar cap and no phase-out. Property under a binding contract signed before January 20, 2025 stays on the old schedule, which is 20% for property placed in service in 2026.
Section 179 is applied first, then bonus on what remains, then regular MACRS on anything left after that. In a year where both are 100%, the order rarely changes the total. It changes the constraints.
Where bonus is now the default
With bonus at 100% and uncapped, it is the simpler tool for most purchases. There is no business income limit, so a business that buys a $150,000 machine in a year with $90,000 of profit deducts the full $150,000 and carries a $60,000 net operating loss forward, where it can offset up to 80% of taxable income in later years. Section 179 in the same year would be limited to $90,000, with $60,000 carried forward as unused Section 179, which is a similar result reached more awkwardly.
Bonus also has no limit for heavy vehicles. A pickup or SUV with a gross vehicle weight rating above 6,000 pounds is exempt from the luxury auto caps, but Section 179 still limits it to $32,000 in 2026. Bonus does not. A $90,000 truck used more than 50% for business can be fully deducted under bonus in the year it is placed in service. Business use has to be substantiated with a log, and if it falls to 50% or below in a later year the excess depreciation is recaptured as ordinary income.
And bonus is not affected by the $4,090,000 phase-out, which matters to a business making a large one-off investment.
Where Section 179 still wins
Roofs and building systems. Bonus applies to qualified improvement property (interior improvements to a nonresidential building) because QIP has a 15-year recovery period. It does not apply to a roof, HVAC, fire protection or security system, which are part of the 39-year building. Section 179 covers all four explicitly. A $200,000 roof on a commercial building you own is a Section 179 question, full stop.
Precision. Section 179 lets you expense $40,000 of a $100,000 asset and depreciate the rest. Bonus is all or nothing for every asset in a class: if you elect out of bonus for five-year property, you elect out for every five-year asset placed in service that year. When the objective is to land taxable income at a particular figure, which it often should be (see below), Section 179 is the only one of the two with a dial.
States that decouple. Roughly a third of states do not follow federal bonus depreciation and require it to be added back and depreciated on their own schedule, while nearly all follow Section 179 at or near the federal limit. An owner with income taxed in California, Pennsylvania or New Jersey will find that "100% bonus" is a federal-only statement, so check your own state's conformity before counting on the state saving.
Used property from a related party. Bonus is not available for property bought from a related party or previously used by the taxpayer. Section 179 has no such rule.
Why writing it all off this year can be the wrong move
Both provisions are deferrals. They move a deduction you would have taken over five or seven years into year one. The deduction is worth your marginal rate in the year you take it, and the later income it displaces is taxed at whatever rate applies then. If those rates are the same, accelerating is a pure timing benefit, worth something but not a great deal at current interest rates. If they are different, the direction matters more than the timing.
The clearest case for restraint is an owner whose income this year is ordinary and whose deduction would push it down through the 22% and 12% brackets, wasting the difference. The clearest case for acceleration is an owner having an unusually good year, in the 32% or 35% bracket, who expects to be back at 24% next year: every dollar deducted now is worth more than it will be later. A second, less obvious case for acceleration is a sole proprietor still under the Social Security wage base, where depreciation reduces self-employment tax at 15.3% and not just income tax.
The interactions people miss
The QBI deduction. Depreciation, whether under Section 179 or bonus, reduces qualified business income, so the 20% deduction shrinks with it: a $100,000 write-off costs $20,000 of QBI deduction, and the net saving is 80% of what the bracket implies. For an owner just above the QBI threshold, though, the same write-off can pull taxable income back below it and restore a deduction the phase-in was taking away. Both effects are worth modeling before the purchase, not after. Note that expensing does not reduce the asset's unadjusted basis for the 2.5% property component of the wage limit; UBIA is measured before depreciation.
Recapture on sale. When the asset is sold, gain up to the depreciation taken is ordinary income under Section 1245, not capital gain. A $90,000 truck fully expensed and sold two years later for $60,000 produces $60,000 of ordinary income. Expensing is a loan from the Treasury, repaid on disposal.
Pass-through basis. A loss created by bonus depreciation in an S-corp or partnership only reaches the owner's return to the extent of basis and at-risk amount, and then only if the passive activity rules allow it. A large bonus deduction in a business you do not materially participate in may be suspended rather than used.
Timing within the year. Both deductions require the asset to be placed in service, meaning ready and available for its intended use, by December 31. An asset delivered on December 30 and installed in January is a next-year deduction. Paying for it in December does not help.
New for manufacturers
The 2025 Act also created 100% expensing for "qualified production property": the building itself, not just the equipment inside it, where a manufacturing, production or refining business begins construction after January 19, 2025 and before January 1, 2029 and places the building in service before 2031. Office, sales, research and lodging space inside the building is excluded. For a business that has been depreciating a plant over 39 years, this is the largest change in the Act, and it has a construction-start deadline attached.
The short version
Bonus is the default for equipment and vehicles because it has no income limit, no cap and no SUV limit. Section 179 is the tool for roofs and building systems, for any state that does not follow bonus, and for landing taxable income at a chosen figure. And before using either, decide what you want taxable income to be this year and next, because the tax saved by a deduction is set by the bracket it comes out of, and a $150,000 write-off that drops you through three of them is a $150,000 write-off used badly.