# Section 179 vs Bonus Depreciation

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Last modified: 2026-05-29T19:39:17+00:00
Type: efin_comparison

## Summary

Section 179 vs Bonus Depreciation. Side-by-side comparison with cost analysis, tax implications, and when each wins.

## Content

Section 179 and bonus depreciation are two different tax mechanisms that both let businesses accelerate equipment-purchase deductions. Most businesses use both, in a specific order. The differences matter when you are at the limits.

Side-by-side

Section 179Bonus depreciation

Annual cap (2026)$1,220,000None
Phase-outAt $3,050,000 of equipmentNone
Income limitCannot exceed taxable incomeCan create or increase NOL
CarryforwardYes (excess to next year)Standard NOL rules apply
Per-item or asset classPer-item electionAll-or-nothing by asset class
Rate100% (up to cap)60% in 2026 (phasing down)
Qualifies for used equipmentYesYes (since 2018)
Vehicles under 6,000 lbs GVWCapped at ~$12,400Capped at depreciation limits
State conformityMost states conform; some lower capsMany states decoupled (varies)



The standard order
Most CPAs apply deductions in this order:

Section 179 up to the cap ($1.22M in 2026) and up to taxable income
Bonus depreciation on the rest at the current-year rate (60% in 2026)
Standard MACRS depreciation on what is left, over the asset's recovery period


Worked example: $300,000 equipment

§179: $300,000 elected (well under $1.22M cap, assuming taxable income is at least $300,000)
Bonus depreciation: $0 left to apply
MACRS: $0 left to depreciate
First-year deduction: $300,000. Tax savings at 25%: $75,000.


Worked example: $2,000,000 equipment

§179: $1,220,000 (capped)
Bonus depreciation: $780,000 × 60% = $468,000
MACRS on remainder: $312,000 over 5-7 years
First-year deduction: $1,688,000. Tax savings at 25%: $422,000.


When §179 is the better choice (per item)

You can elect §179 per asset; bonus is all-or-nothing per class. If you want to take 100% on Asset A but not Asset B, §179 lets you. Bonus does not.
If your state decouples from bonus depreciation but conforms to §179, take §179 first to get the state benefit.


When bonus depreciation is the better choice

If §179 would create a taxable-income limit issue (cannot deduct more than taxable income), bonus has no income limit and can create a net operating loss (NOL).
If equipment is in a phase-out zone (over $3.05M of total annual purchases), §179 is reduced; bonus is not.
If you want to use it on assets that exceed the §179 cap.


State conformity matters
Many states decouple from federal bonus depreciation. They may allow §179 but not bonus. Common decouplers: New Jersey (historically), Pennsylvania (historically), California, Minnesota. Check your state.

See our Section 179 guide and bonus depreciation glossary entry.

Not tax advice. Consult your CPA for your state and situation.