Section 179 and bonus depreciation calculator

For 2026 a business can expense up to $2,560,000 of qualifying equipment under Section 179, and bonus depreciation is 100%. A single filer with $150,000 of profit who buys a $60,000 machine and expenses it all cuts tax by $18,292 this year, against $2,614 if the machine were depreciated normally. The lifetime saving is the same $18,292. The difference is timing, worth about $2,115 in present value at 5%. With only $60,000 of profit this year and $150,000 later, expensing it all now would cost $3,502 in present value.

The calculator applies the limits in the order the law does, then does what most tools skip: it prices the deduction. It shows the tax saved this year, the tax saved each later year under regular depreciation, and whether taking the deduction now is actually worth more, given your income this year and after it.

Who reaches for this

The calculator starts with the asset’s business basis: cost times the business-use percentage. It then applies the Section 179 election within its limits, takes bonus depreciation on the remaining basis if you leave it on, and runs regular depreciation on any balance. For passenger cars, it applies the annual depreciation limits. Every step feeds the next, which is the order the tax form uses.

The second half of the calculator is the part that matters for decisions. It compares your elections with the alternative of doing nothing special, taking regular depreciation only. It runs both paths for ten years through the same tax engine as the 1099 tax calculator, so self-employment tax, income tax and the QBI deduction are all in the saving. The difference between the two paths, discounted at the rate you choose, is the present-value gain or loss from accelerating.

Two things changed in 2025, and both are now in force for 2026. Public Law 119-21, the One Big Beautiful Bill Act, raised the Section 179 limits sharply and made 100% bonus depreciation permanent. That likely explains why searches for this deduction jumped this year, and why many pages still show numbers that are years out of date.

Bonus depreciation depends on when you acquired the asset

The rate turns on the acquisition date, which trips people up. Before the 2025 law, the rate was falling by 20 points a year. The law restored 100% for property acquired after January 19, 2025 and left the old schedule in place for property acquired before January 20, 2025 under a binding written contract.

Most business owners buying equipment now are in the first row. The second row matters mainly for large projects that were contracted before the law changed. A few popular pages still list 40% or 60% as the current rate, and at least one shows a $1,080,000 Section 179 limit, a figure that is several years old. Use the table above and check the figures against the IRS publications listed in the sources.

All three recover the cost of an asset. They differ in how fast, how much control you have, and what they can do to your tax return.

Section 179 is the precise tool. You pick the assets and the amounts, and you can stop at the point that matches your income. Bonus is the blunt tool: it takes everything in a class unless you opt out, with no income limit. Regular depreciation is what you get if you do nothing else, and is what the other two are measured against.

How they combine

The order is fixed. Section 179 comes first and reduces the basis. Bonus then applies to the basis that remains, and regular depreciation applies to anything left after that. A $60,000 machine with a $20,000 Section 179 election and bonus on takes $20,000 plus $40,000, for $60,000 in year one. With bonus off, the same election leaves $40,000 for regular depreciation, and the seven-year table gives 14.29% of it, or $5,716, in year one. You can use Section 179 on some assets, bonus on others, and elect out of bonus for a class if deducting it now would not help.

The difference that matters most: losses

Section 179 cannot exceed your income from active businesses, so it cannot create a loss. Bonus depreciation has no such limit and can. That sounds like an advantage, and for a taxpayer with other income it sometimes is. For a sole proprietor it is often a trap, because a loss carries forward as a net operating loss that reduces income tax later but does not reduce self-employment tax. The next section quantifies it.

A deduction is not a refund. Expensing an asset saves your marginal tax rate on its cost, and for a self-employed person that rate includes self-employment tax. For a single filer with the same profit next year, here is what $10,000 of equipment saves when it is fully expensed.

The pattern is the same as it is for mileage. Each dollar of equipment returns between 22 and 32 cents of federal tax at these incomes, more with a state income tax. The other 68 to 78 cents is your cash. Buying equipment to get the deduction loses money. Buying equipment you were going to buy anyway, and deciding when to deduct it, is the real decision.

The example in full

A single filer has $150,000 of business profit before the purchase, expects the same next year, and buys a $60,000 machine (seven-year property). Fully expensing it under Section 179 deducts $60,000 in year one and saves $18,292. Regular depreciation deducts $8,574 in year one, then $14,694, $10,494, $7,494, $5,358, $5,352, $5,358 and $2,676, and saves $2,614 in year one and the same $18,292 in total. The lifetime saving is identical because the deduction totals $60,000 either way. Acceleration is worth $2,115 in present value at a 5% discount rate, and $3,157 at 8%.

When accelerating loses money

The gain from acceleration assumes your current tax rate is at least as high as your future rate and that you can use the deduction. Change either and the answer flips. The same $60,000 machine under different profit patterns:

Read the table from the top. When income is high now and lower later, expensing wins by the most: the deduction lands in the bracket you are leaving. When income is low now and higher later, spreading wins, because the deduction is used up in the cheap bracket. And when the purchase is larger than this year’s profit, expensing loses most of all. With $30,000 of profit, the $60,000 is deducted as $30,000 of Section 179 plus $30,000 of bonus, which creates a $30,000 loss. That loss carries forward and reduces only income tax later. It never reduces self-employment tax, so it is worth roughly 14 cents less on the dollar than a deduction taken against profit.

This is the practical rule: deduct up to your profit this year, and spread the rest. The way to do that is to elect Section 179 up to your income, opt out of bonus for the class, and let regular depreciation carry the balance into profitable years. The net operating loss carryover is also limited to 80% of taxable income in the year it is used, a limit the calculator does not model, which makes the loss case slightly worse than shown.

A decision path for your elections

Start with two estimates: your profit this year before the purchase, and your profit next year. Then match the situation to the election.

The table is a starting point. Bracket thresholds, the QBI deduction, state rules and your plans for the asset all move the answer, which is why the calculator runs both paths on your numbers. If the two paths are close, choose the simpler one and keep the records that support it.

Vehicles follow separate rules that depend on the weight rating. The gross vehicle weight rating is on the door-jamb label, and it is the number that decides the category.

Passenger cars: the caps decide everything

A $55,000 car used 100% for business can deduct only $20,300 in year one, however you elect it. The rest follows at $19,800, $11,900 and $7,160 a year until the cost is recovered. With bonus on, the schedule is $20,300, $19,800, $11,900 and $3,000 across four years. Ordinary depreciation would give $11,000, $17,600, $10,560, $6,336, $6,336 and $3,168 over six. Bonus depreciation therefore speeds a passenger car up only slightly: it saves $6,189 in year one against $3,353, and is worth about $620 in present value at 5%. At 75% business use, every cap is scaled by 75%.

Heavy SUVs and trucks: full expensing is possible

Vehicles rated over 6,000 pounds escape the passenger-car caps, and bonus depreciation has no vehicle cap. Section 179 is limited to $32,000 for an SUV in this weight class, but bonus takes the rest. A $70,000 SUV used 100% for business deducts $32,000 under Section 179 and $38,000 in bonus, or $70,000 in year one, and saves $20,960. Depreciated normally, the same vehicle deducts $14,000 in year one and saves $4,268. With only Section 179 and no bonus, year one is $39,600 and saves $12,073. At 75% business use, the basis is $52,500 and the Section 179 cap scales to $24,000.

Three conditions apply. Business use must be above 50%, or neither deduction is allowed. Vehicles are listed property, so you need a contemporaneous record of business use, which is exactly what a mileage log provides. And using Section 179 or bonus on a vehicle means you cannot use the standard mileage rate for it. The mileage deduction calculator compares the standard rate with actual expenses and covers the first-year lock-in in detail.

The recapture cost

A large first-year deduction comes back if business use drops to 50% or less in a later year, and on sale the gain is measured from a lower basis. A vehicle expensed to zero and later sold for $30,000 produces $30,000 of taxable gain, taxed as ordinary income up to the depreciation taken. Expensing is a timing benefit, and for a vehicle you plan to sell within a few years, the timing benefit shrinks.

Leased vehicles

A true lease cannot use Section 179 or bonus, because you do not own the vehicle. Lease payments are deductible for the business share, with an inclusion amount for higher-priced vehicles. For a passenger car, where the depreciation caps are tight, leasing can produce larger deductions in the first years than buying, so compare the two before you sign.

Section 179 covers tangible personal property used more than 50% in an active business and acquired by purchase. That includes machinery, equipment, computers, office furniture, tools, and off-the-shelf software. It also covers certain improvements to nonresidential buildings: qualified improvement property, roofs, HVAC systems, fire protection and alarm systems, and security systems. The building itself, land, and most rental real estate do not qualify.

Used property qualifies as long as you did not receive it as a gift or inheritance and did not buy it from a related party. Bonus depreciation has similar rules: the property must not have been used by you before and must not come from a related party. Property used mostly outside the United States is excluded. The property must be bought, not just leased, and must be depreciable, so inventory, land and personal assets are out.

Business use is the test that fails most often. The asset must be used more than 50% for business in the year it is placed in service, and the deduction is limited to the business share. A laptop used 80% for the business qualifies for 80% of its cost. A car used 45% for business qualifies for no Section 179 or bonus, and must be depreciated over a longer period under the alternative system.

An asset counts for 2026 only if it is placed in service by December 31, 2026. That means ready and available for use, not bought, not delivered, and not paid for. A machine delivered on December 28 that is installed and running in January is a 2027 asset. Equipment financed by a loan is treated as bought when you take ownership, so the deduction does not depend on when you pay. A true lease does not count at all, since you do not own the equipment.

The mid-quarter trap

Regular depreciation normally uses the half-year convention, which treats every asset as bought at mid-year. If more than 40% of the year’s depreciable basis, after Section 179, is placed in service in the last quarter, every asset for the year must use the mid-quarter convention instead. A December purchase then gets 5% of its cost as a first-year rate for five-year property, against 20% under the half-year convention. Bonus depreciation is not affected, and neither is any amount you take under Section 179, which is why the trap matters mainly when you opt out of bonus or the asset is capped. The planner tests the 40% rule for you.

Do not buy for the deduction

The deduction returns 22 to 32 cents of every dollar spent, so a purchase you would not otherwise make loses roughly 70 cents on the dollar. The exception is a purchase you had already planned. Then the question is timing: whether to buy before year-end to move the deduction into a higher-income year. If you buy near year-end, run the numbers on your estimated tax as well. A large deduction changes the annual tax, and the quarterly estimated tax calculator shows how it changes the payments still due.

Claiming it on the return

Depreciation and the Section 179 election are reported on Form 4562. Part I computes the Section 179 deduction and its limits, Part II reports bonus depreciation, Part III reports regular depreciation, and Part V collects the business-use details for vehicles and other listed property. For a sole proprietor the total flows to the depreciation line of Schedule C. Partnerships and S corporations report the amounts on their own returns and pass them through on K-1s.

Make the Section 179 election on the return for the year the asset is placed in service, including extensions. To opt out of bonus for a class of property, attach the election statement to a timely filed return. Keep the invoice, the proof of delivery and installation, the date the asset began business use, and the log or records that show its business-use percentage. Those documents answer the two questions an examiner asks: when did it start working, and how much of the time was it for the business.

A fast deduction has a mirror image. If business use falls to 50% or less in a later year, the excess depreciation is recaptured as ordinary income in that year. The rule mostly bites vehicles and other listed property, where business use is easy to let slip. A business that expenses a $60,000 truck in 2026, then uses it for personal driving more than half the time in 2028, owes tax on the difference between what was deducted and what regular straight-line depreciation would have allowed.

Selling an asset triggers a related computation. The taxable gain equals the sale price minus the adjusted basis, and the adjusted basis is cost minus all depreciation taken, including the Section 179 and bonus amounts. An asset expensed to zero and sold for $20,000 has a $20,000 gain, and the gain up to the amount of depreciation is taxed as ordinary income, not at capital-gain rates. Trade-ins and like-kind rules for equipment differ, so bring the disposal to your preparer before it happens.

The federal numbers are not the whole picture. Many states cap Section 179 well below the federal limit or decouple from bonus depreciation, so the state deduction can be much smaller and the state tax saved smaller with it. California, for example, has generally limited Section 179 to $25,000 and does not allow bonus depreciation. If you are in a state that decouples, the state return needs its own depreciation schedule.

Pass-through entities add a layer. A partnership or S corporation elects Section 179 at the entity level, and the amount passes to the owners on their K-1s. The dollar limit and the income limit then apply at both levels, and an owner’s basis limits how much of a loss they can use. Spouses who file separately share one Section 179 limit unless they elect a different split. And the deduction reduces qualified business income, so it lowers the QBI deduction along with the taxable income. The calculator’s tax figures include that interaction for a sole proprietor and leave the pass-through mechanics to your preparer.

Buying a vehicle? Compare the standard mileage rate with actual expenses in the mileage deduction calculator, or see what the deduction does to your annual bill with the self-employment tax calculator.