Section 179 vs Bonus Depreciation: Which One Should You Use?

Both Section 179 and Bonus Depreciation let you deduct the full cost of a business asset in the year you buy it. But they work differently, have different limits, and apply to different situations.

Section 179 at a Glance

Feature	Section 179
2026 Maximum	$1,220,000
Phase-out threshold	$3,050,000
Business use required	>50%
New or used assets	Both
Can create a loss?	No — limited to business income
SUV limit (>6K lbs)	$28,900

Bonus Depreciation at a Glance

Feature	Bonus Depreciation
2026 Rate	40% (phasing down from 100% in 2022)
Maximum deduction	No dollar limit
Business use required	>50%
New or used assets	Both (since TCJA 2017)
Can create a loss?	Yes — can generate a net operating loss
SUV limit	None (deducts based on % rate)

Which One Should You Use?

💡 Key insight: You can use BOTH on the same asset. Section 179 first (up to the limit), then bonus depreciation on the remaining basis, then regular MACRS on anything left.

Here's the decision framework:

Situation	Best Choice	Why
Asset under $1.2M, profitable business	§179	Full deduction, simpler
Business has a loss this year	Bonus	§179 can't create a loss; bonus can
Heavy SUV (>6K lbs)	§179	Full deduction for qualifying SUVs
Asset over $1.2M	Bonus + §179 combo	§179 up to limit, bonus on the rest
Want to spread deductions over years	Regular MACRS	Skip both and depreciate over 5-7 years

Bonus Depreciation Phase-Down Schedule

Year	Bonus Rate
2022	100%
2023	80%
2024	60%
2025	40%
2026	20%
2027+	0% (unless Congress extends)

⚠️ Timing matters: Bonus depreciation is phasing down every year. If you're buying a major asset, doing it sooner captures a higher bonus rate. But don't buy assets just for the tax deduction — the business purpose must come first.

Real Example: $65,000 Business Vehicle

Assume a qualifying SUV over 6,000 lbs, 100% business use, placed in service in 2026:

Method	Year 1	Year 2-5	Total
§179 Only	$65,000	$0	$65,000
Bonus Only (20%)	$13,000	$52,000 over MACRS	$65,000
§179 + Bonus	$65,000	$0	$65,000
MACRS 5-Year Only	$13,000	$52,000	$65,000

For a heavy SUV, Section 179 alone gets you the full deduction in year one. Bonus depreciation at 20% doesn't add value here. But for assets where §179 is maxed out or the business has a loss, bonus depreciation fills the gap.

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