If you are thinking about buying a truck, machine, or new equipment before year-end, two tax breaks can help you write off the cost fast: Section 179 and bonus depreciation. For 2026 both are more generous than they have been in years, and used together they let many small businesses deduct the full price of qualifying purchases in the year they buy. Here is how each one works, what qualifies, and how to decide which to use.
What is the Section 179 deduction limit for 2026?
For 2026, businesses can immediately deduct up to $2,560,000 in qualifying equipment under Section 179, and the deduction begins to phase out once total purchases pass roughly $4,090,000. Section 179 lets you expense the cost of qualifying business property in the year you place it in service instead of depreciating it slowly over five or seven years. It is designed for small and mid-sized businesses, which is why the deduction shrinks dollar-for-dollar once your spending climbs into the millions.
One important limit: Section 179 cannot exceed your taxable business income. It can bring your income to zero, but it cannot create a loss. That is the biggest practical difference between it and bonus depreciation. The deduction is also elected asset by asset, which gives you control: you can expense one machine fully, depreciate another the normal way, and split a third however the math works best for your tax picture.
Because the deduction phases out dollar-for-dollar above roughly $4,090,000 of purchases and disappears entirely near $6,650,000, Section 179 stays squarely aimed at small and mid-sized businesses. Most contractors, shops, and service firms never come close to those caps, so the practical limit for them is their own taxable income, not the spending ceiling.
What is bonus depreciation in 2026?
Bonus depreciation is back to 100% for 2026, meaning you can deduct the entire cost of qualifying property in the first year with no dollar cap. Recent tax law restored full bonus depreciation for qualified property acquired and placed in service after January 19, 2025, reversing the step-down (80%, then 60%) that had been phasing it out. Unlike Section 179, bonus depreciation has no annual spending limit and no income limit, so it can create or increase a business loss that carries to other years.
Section 179 vs. bonus depreciation: which is better?
For most small businesses, the smart move is to use both, in order. Section 179 is best when you want to pick and choose specific assets to expense, or fine-tune your deduction so you keep some taxable income. Bonus depreciation is best when you have bought a lot of equipment, want the maximum write-off, or want a deduction large enough to create a loss. A common approach:
- Apply Section 179 first to the assets you most want to expense, up to your taxable income.
- Use 100% bonus depreciation on whatever qualifying basis is left.
- Coordinate with your state rules, because many states do not follow federal bonus depreciation and cap Section 179 at a lower amount.
Because state conformity, income limits, and future-year tax rates all factor in, the "right" answer depends on your numbers. This is exactly the kind of question our tax and compliance team models out before you sign a purchase order.
What vehicles and equipment qualify for a write-off?
Both deductions cover tangible business property used more than 50% for business. Common qualifying purchases include:
- Machinery, tools, and production or shop equipment
- Computers, servers, and off-the-shelf software
- Office furniture and equipment
- Work vehicles and certain heavy trucks and vans
- Some interior building improvements to nonresidential property
Vehicles have special rules. Passenger vehicles at or under 6,000 lbs GVWR face annual "luxury auto" caps. SUVs between 6,000 and 14,000 lbs are limited to a $32,000 Section 179 deduction for 2026. Heavy trucks and vans over 6,000 lbs with a cargo bed of six feet or more can often be fully expensed. For contractors and trades, that distinction can mean thousands of dollars in the first year.
Should I buy equipment before year-end?
Only if the purchase makes business sense on its own. A tax deduction returns cents on the dollar, so never buy equipment just to lower your tax bill. That said, if you already need the asset, timing matters: to claim the deduction for 2026, the property must be purchased and placed in service by December 31, 2026. Placed in service means delivered and ready to use, not merely ordered or paid for. If you want the write-off this year, do not wait until the last week of December to schedule delivery and setup.
It is also worth thinking a year or two ahead. A giant first-year deduction feels great, but it also means no depreciation left to claim in future years. If you expect to be in a higher tax bracket next year, or you want steady deductions to offset rising income, spreading depreciation out can be worth more over time than writing everything off at once. A quick projection before you buy usually settles the question.
How do I actually claim Section 179 and bonus depreciation?
Both are claimed on your business tax return using Form 4562, Depreciation and Amortization. You list each qualifying asset, elect Section 179 where you want it, and apply bonus depreciation to the rest. A few practical tips make it go smoothly:
- Keep the invoice, proof of payment, and in-service date for every asset in your records.
- Note the business-use percentage for anything used partly for personal reasons, especially vehicles.
- Confirm how your state treats each deduction, since many states decouple from federal bonus depreciation.
Planning a big purchase before year-end? We can run the numbers on Section 179 versus bonus depreciation, factor in your state, and make sure the deduction actually helps your cash flow. Book a free consultation and let's map it out together.