Section 179 and Bonus Depreciation Explained

Section 179 and Bonus Depreciation

Section 179 Deduction

Allows businesses to immediately expense the cost of qualifying equipment and property in the year placed in service.

2025 Limits:

• Maximum deduction: $1,220,000
• Phase-out threshold: $3,050,000

Qualifying Property:

• Business equipment and machinery
• Business vehicles (limits apply)
• Computers and technology
• Off-the-shelf software
• Qualified improvement property (QIP)

Key Rule: The deduction cannot exceed your business's taxable income.

Bonus Depreciation

Allows immediate expensing of a percentage of qualifying property costs.

Phase-down Schedule:

• 2024: 60%
• 2025: 40%
• 2026: 20%
• 2027+: 0% (unless Congress acts)

Difference from Section 179:

• Can create a net operating loss (Section 179 cannot)
• Applies to both new and used property
• No income limitation

Strategy

Use Section 179 first to the extent of taxable income, then use bonus depreciation for any remaining balance if creating a loss is acceptable.

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Purchasing equipment this year? Plan your depreciation strategy with our business tax experts.