Section 179 vs Bonus Depreciation Comparison 2026
Section 179 and bonus depreciation both let businesses immediately expense capital purchases. OBBB (P.L. 119-21) made 100% bonus depreciation permanent in 2025+ — previously scheduled to phase down to 0% by 2027. Section 179 still has caps ($1.22M expense, $3.05M phase-out for 2026). Choosing the right method affects basis, recapture, and state tax conformity.
OBBB Made Bonus Permanent
Before OBBB (P.L. 119-21, July 2025), bonus depreciation was scheduled to phase down: 100% (2017-2022), 80% (2023), 60% (2024), 40% (2025), 20% (2026), 0% (2027+). OBBB extended and made permanent 100% bonus for assets placed in service after Jan 19, 2025. This single change eliminated planning complexity for many small businesses — bonus is now the default for most equipment purchases.
When Section 179 Still Wins
Three scenarios: (1) State doesn't conform to federal bonus rules (CA, NY, NJ, PA, AR, MD) — §179 deductible at state level, bonus not. (2) You want to deduct part of an asset and depreciate the rest (§179 allows selective application). (3) Real estate improvements (qualified improvement property) eligible for §179 expensing even though they're 15-year MACRS class — bonus also works but §179 is sometimes cleaner.
Strategic Considerations
Bonus depreciation can create or increase NOLs — useful for shifting deductions across years. §179 cannot create NOL (limited to taxable business income). State conformity drives a lot of the analysis — always model federal AND state outcomes. Vehicle bonus is capped (luxury auto $20,400 first year in 2026) — use §179 for trucks/SUVs over 6,000 lbs to unlock full expensing.
Source: IRC §179, §168(k), OBBB (P.L. 119-21), 2026 IRS inflation adjustments. Last updated: May 2026.