Section 179 vs. Bonus Depreciation: Which Should You Use in 2026?

A business that buys a $60,000 truck or $180,000 of shop equipment can now write off the whole thing in year one two different ways: Section 179 expensing or 100% bonus depreciation. Both produce the same headline number, which is exactly why owners get the choice wrong — they take the software default and find out in March that the deduction landed in a year where it was worth 10 cents on the dollar instead of 24.

The real question in 2026 is not which method gives a bigger deduction. It is which one gives you control over how much you deduct, which assets you deduct it on, and what happens on your state return.

What the One Big Beautiful Bill Act changed

Before OBBBA, bonus depreciation was phasing down and would have been 20% in 2026. The Act made 100% bonus depreciation permanent for qualified property acquired and placed in service after January 19, 2025. The IRS confirmed the details in Notice 2026-11, which also spells out a trap: an asset bought under a binding contract signed on or before January 19, 2025 stays under the old rules and gets only 40% bonus in 2025, even if delivered later.

Section 179 got a raise too. For tax years beginning in 2026, the maximum deduction is $2,560,000, phasing out dollar for dollar once you place more than $4,090,000 of qualifying property in service during the year (Rev. Proc. 2025-32, section 4.24). For most owner-led businesses the dollar cap is not the constraint; the other limits are.

Where the two methods split: income limits and vehicles

The taxable income limitation

Section 179 cannot take your business income below zero. The deduction is limited to taxable income from the active conduct of all your trades or businesses, and for an individual that includes W-2 wages, so an owner who draws a salary usually has more room than the entity's profit suggests (IRS Publication 946). Anything you cannot use carries forward to a year with income to absorb it.

Bonus depreciation has no such limit. If a company with $95,000 of profit expenses $180,000 of equipment through bonus, it reports an $85,000 loss. For a sole proprietor or S corporation owner, that loss flows to the personal return and offsets a spouse's wages or investment income; if nothing is there, it becomes a net operating loss carried forward. Two cautions: a pass-through loss above $256,000 for single filers or $512,000 for joint filers in 2026 is an "excess business loss" that is pushed forward rather than deducted currently, and an S corporation shareholder can only deduct a loss up to their stock and loan basis. A truck financed by the corporation does not give the shareholder basis.

Section 179 is the scalpel and bonus is the sledgehammer. In our practice we use Section 179 first to dial in exactly the deduction we want, and elect out of bonus by asset class when a full write-off would waste deductions in a low bracket.

Vehicles: the 6,000-pound line and the 2026 luxury auto caps

A "passenger automobile" for tax purposes is a car, SUV, pickup or van rated at 6,000 pounds gross vehicle weight or less, and those vehicles face annual depreciation caps no matter which method you use. For vehicles placed in service in 2026, Rev. Proc. 2026-15 sets the limits below. Bonus adds only $8,000 to the first year; the rest of a $70,000 sedan waits years.

Cross the 6,000-pound GVWR line (the rating is on the driver's door sticker, not the curb weight) and the caps disappear. One wrinkle: Section 179 on a heavy SUV is limited to $32,000 for 2026. Bonus depreciation is not, so a $78,000 heavy SUV used 100% for business can take $32,000 of Section 179 plus $46,000 of bonus, or simply 100% bonus. Pickups with a full-length open bed and cargo vans with no rear seating are carved out of the SUV cap entirely. Two rules apply to every vehicle: business use must exceed 50% to use either method, and if it later drops to 50% or below, the excess depreciation is recaptured as income.

Florida and other states do not always follow

Florida's corporate income tax has never adopted federal bonus depreciation. Under the state's 2026 conformity bill (HB 7031) and the Department of Revenue's TIP 26C01-01, a Florida corporate filer adds back the federal bonus deduction and then subtracts one-seventh of it each year over seven years, starting with the year of the addback. The bill also keeps Florida on the pre-OBBBA Section 179 limits ($1.25 million cap, $3.13 million phase-out), so the extra federal Section 179 is added back too.

Who this actually hits: C corporations and LLCs taxed as C corporations, which file Form F-1120 and pay Florida's 5.5% corporate tax. Florida has no personal income tax, so a sole proprietor, partnership or S corporation feels none of this. If you operate in states that do tax pass-through income, check each one; many decouple from bonus in their own way.

When you should not expense everything

A deduction is only worth the tax rate it offsets. Four situations argue for taking less than 100% in year one:

• A low-income year. Deductions that drive taxable income into the 10% and 12% brackets, or below zero, are worth far less than the same deductions in a 24% year. Deferred depreciation is not lost; it shows up on next year's return.
• The QBI deduction. The 20% qualified business income deduction is computed on business income after depreciation, so every dollar of depreciation costs 20 cents of QBI deduction, and a loss creates a negative QBI carryforward. See our QBI deduction guide for the 2026 thresholds.
• Rising income. If 2027 looks bigger than 2026, or you plan to sell the business, spreading deductions forward matches them to higher rates.
• Lenders. Tax depreciation is not book depreciation. A banker reading a return that shows a loss will ask questions.

Expensing is also not free money. Sell a fully expensed asset and the entire sale price is ordinary income: a $60,000 truck expensed in 2026 and sold for $35,000 in 2028 produces $35,000 of ordinary income in 2028.

Worked example: $180,000 of equipment in a slow year

Gulf Coast Mechanical is a Tampa HVAC contractor taxed as an S corporation with one owner, married filing jointly. The owner takes an $80,000 salary; the spouse earns $60,000. 2026 was slow, and the company expects $95,000 of ordinary income before depreciation on new equipment. In October it paid cash for $180,000 of equipment: a $78,000 heavy-duty service truck, $92,000 of shop equipment (7-year property) and $10,000 of computers. 2027 should be normal, around $220,000.

Option A expenses all $180,000 in 2026 through bonus. Option B elects out of bonus, takes $60,000 of Section 179 on the shop equipment, and depreciates the remaining $120,000 under regular MACRS, which yields $22,173 in year one. Federal numbers, using the 2026 standard deduction of $32,200:

Option A looks like the winner on the 2026 return: $13,000 less tax. But look at what each dollar of deduction bought. Option A's $180,000 saved $27,580, about 15 cents per dollar, because the last $85,000 produced a loss that offset income taxed at 10% and 12%. It also created an $85,000 qualified business loss that cuts the 2027 QBI deduction by $17,000, worth roughly $4,000 at the family's 24% rate. Option B's $82,173 saved 17.6 cents per dollar, and the remaining $97,827 of basis is deducted from 2027 on, when each dollar is worth about 19 cents after the QBI haircut (24% times 80%).

Add it up and Option B saves roughly $9,700 more over the life of the equipment, before the time value of money. If the family needs the extra $13,000 in April 2027, Option A is still defensible, but it should be a decision made on purpose. For a med spa buying lasers and devices, the same logic applies to aesthetic equipment.

Common mistakes

The most expensive one is ordering equipment in December that is not delivered and ready for use until January. Depreciation starts when an asset is placed in service, not when it is paid for. A truck sitting at the dealer on December 31 is a 2027 deduction.

Close behind: taking bonus on a vehicle that is 55% business use and letting personal use creep past half, which triggers recapture; deducting a bonus-driven S corporation loss without basis; and expensing on the federal return without telling the Florida corporate preparer, which makes the F-1120 wrong for seven years. Owners also lose Section 179 carryforwards because last year's preparer did not track them. Ask for the carryover schedule when you switch accountants.

When to get help

If you are planning a purchase over about $25,000 in the fourth quarter, the depreciation decision belongs in a tax planning conversation before you sign, not on the return in March. We run the projection both ways, including the QBI effect and, for corporate filers, the Florida addback, and tell you what each dollar of deduction is worth this year versus next. That projection also feeds the rest of your year-end planning, since it changes your estimated tax and retirement contribution math.

It only works if the fixed-asset list is right, which is why our monthly bookkeeping clients get the easiest version of this decision: we already know what was bought, when it went into service and what the year looks like. If you want a second opinion on a purchase you are about to make, request a 20-minute fit call and bring the quote.

Jenny Gao, CPA, EA

Founder of Balance Partners. Florida-licensed CPA and IRS Enrolled Agent with more than a decade of accounting and tax experience. Jenny writes and reviews every guide on this site. About Jenny

This article is general educational information for U.S. business owners and is not accounting, tax, legal, payroll or financial advice for your situation. Rules change and vary by entity, state and facts. Balance Partners, LLC does not provide audit, review or other attest services. Last reviewed September 14, 2026.