Question 1

What is the difference between Section 179 and bonus depreciation?

Accepted Answer

Section 179 has a dollar cap ($1.25M in 2026) and a business income limitation (can't create net loss). Bonus depreciation has no dollar cap but is a percentage (40% in 2026, declining). Section 179 is generally elected per-asset; bonus is automatic but you can 'elect out' per asset class. Most small businesses use Section 179 first because it doesn't reduce the depreciation basis below zero — bonus depreciation does.

Question 2

Can I depreciate land?

Accepted Answer

No. Land is not depreciable under MACRS or any other US tax depreciation system. Only the structures and improvements ON land are depreciable. When you purchase real estate, you must allocate the price between land (non-depreciable) and building (depreciable) — typically 20-30% to land, 70-80% to building.

Question 3

What is the half-year convention?

Accepted Answer

Most MACRS property uses the half-year convention, meaning the asset is treated as placed in service mid-year — receiving only half a year of depreciation in year 1 (and half year in the final recovery year). This is why MACRS year-1 percentages look small (e.g., 20% on 5-year property, not 40%). The 'mid-quarter convention' applies if you place more than 40% of total year's assets in the last quarter.

Question 4

How does bonus depreciation phase out work?

Accepted Answer

Under TCJA 2017 with OBBB 2025 modifications: 2024 = 60%, 2025 = 60%, 2026 = 40%, 2027 = 20%, 2028+ = 0%. Place assets in service before each year-end to lock in that year's percentage. There's discussion in Congress of extending or restoring 100% bonus — monitor IRS announcements.

Question 5

Can I claim Section 179 on a vehicle?

Accepted Answer

Yes, but with luxury vehicle limits. For 2026: passenger autos limited to ~$12,200 first year, ~$19,200 with bonus depreciation. SUVs over 6,000 lbs GVW get a special $30,000 Section 179 limit. Vehicles must be used >50% for business — track mileage logs carefully. Source: IRS Rev. Proc. 2024-40, Section 280F.

Question 6

Do I have to use MACRS for all business assets?

Accepted Answer

Almost always yes for assets placed in service after 1986. Limited exceptions (ADS straight-line for foreign-use property, certain elections) but most US business depreciation uses MACRS. Real estate must use the longer 27.5/39-year MACRS straight-line method — accelerated MACRS does not apply to real estate.

Asset Class	Examples
3-year	Software (off-the-shelf), racehorses, tractor units
5-year	Computers, peripherals, vehicles, light trucks, R&D equipment
7-year	Office furniture, fixtures, manufacturing equipment
10-year	Water transportation equipment, single-purpose ag structures
15-year	Land improvements, restaurant property, qualified leasehold
20-year	Farm buildings (other than single-purpose ag)
27.5-year	Residential rental real estate
39-year	Commercial real estate (offices, retail, warehouses)

MACRS Depreciation Calculator

MACRS Recovery Periods Cheat Sheet

Section 179 — Immediate Expensing Up to $1.25M

Bonus Depreciation 2026 — The 40% Year

Optimization Order: Section 179 → Bonus → MACRS