Section 179 vs Bonus Depreciation Calculator 2026

Section 179 vs Bonus Depreciation — 2026 OBBB Rules

The One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) restored 100% bonus depreciation for qualifying property placed in service in 2026 and beyond, reversing the phase-down that had dropped bonus to 40% in 2025. This calculator computes the year-one tax benefit under both Section 179 expensing and bonus depreciation so you can pick the better path for each asset. The Section 179 cap for 2026 is $1,250,000 with a $3,130,000 dollar-for-dollar phase-out threshold per IRS inflation-adjusted limits (source: IRS Publication 946).

Section 179 lets a business immediately expense qualifying property costs in the year placed in service, up to the annual cap and limited to the business's net taxable income. Bonus depreciation allows immediate expensing of a percentage of cost (100% in 2026 per OBBB) and is NOT limited by business income — it can create or increase a net operating loss. The choice matters when your business income is low, when you want to preserve some depreciation for future years, or when state conformity rules differ.

When Section 179 Beats Bonus

Section 179 wins when state tax conformity favors it. Most states conform to federal Section 179 limits but decouple from bonus depreciation, requiring add-backs. A business in California, New Jersey, New York, or several other decoupled states should run the math both ways — at the federal level the answer may favor bonus, but at the state level Section 179 yields a bigger combined deduction. Section 179 also requires you to elect on Form 4562, asset-by-asset, giving you flexibility to time the deduction by asset class.

Section 179 has SUV/truck limits too. Heavy SUVs (over 6,000 lbs GVWR) are capped at $30,500 of Section 179 for 2026, with the remainder eligible for bonus depreciation. Passenger autos under 6,000 lbs face strict luxury-auto depreciation limits ($20,400 year-1 first-year limit including bonus per IRS Rev. Proc. 2024-13). This calculator applies a simplified treatment — consult a tax pro for vehicle specifics.

When Bonus Depreciation Beats Section 179

Bonus is better when your business has a net loss or low net income, since Section 179 cannot create a loss but bonus can. Bonus also applies automatically to all qualifying assets in the year placed in service (unless you elect out by class life), reducing paperwork. Qualified Improvement Property (QIP — interior building improvements) is eligible for bonus and a 15-year recovery life under the TCJA glitch fix.

The 100% bonus restoration under OBBB applies to "qualified property" acquired and placed in service after January 19, 2025 per the bill text. Property acquired before that date is governed by prior phase-down rates (60% in 2024, 40% in 2025). For acquisition-date planning, see the IRS guidance on placed-in-service rules.

Recapture, AMT, and Section 199A Interactions

If you sell or dispose of an asset before the recovery period ends, depreciation recapture under Section 1245 (equipment) or Section 1250 (real estate) treats the gain as ordinary income up to the depreciation taken. This can convert a long-term capital gain into ordinary income. For partial-personal-use vehicles, recapture also applies if business use falls below 50% in any post-acquisition year.

Accelerated depreciation reduces your qualified business income (QBI), which lowers the Section 199A QBI deduction. The interplay is small for most filers but can be material for upper-bracket pass-through owners. See our QBI 199A calculator to model the combined effect, and our depreciation recapture calculator for sale-year exit math.

Last updated April 2026. Sources: IRS Publication 946, irs.gov (OBBB guidance). Consult a CPA for state-specific planning.