For 2026, Section 179 allows businesses to deduct up to $2,560,000 of qualifying equipment and software immediately, and 100% bonus depreciation applies to qualifying purchases with no dollar cap, but timing and business income still determine how much of that benefit you can actually use this year.
Quick Answer
In 2026, businesses can deduct up to $2,560,000 in qualifying equipment, vehicles, and off-the-shelf software under Section 179, with the deduction phasing out dollar-for-dollar once total qualifying purchases exceed $4,090,000. On toxp of that, 100% bonus depreciation, made permanent under the One Big Beautiful Bill Act for qualifying property placed in service after January 19, 2025, applies with no dollar limit and no business-income cap. The practical difference: Section 179 is limited to your business’s taxable income, while bonus depreciation is not and can even create a deductible loss.
What Changed for 2026
Under prior law, bonus depreciation was scheduled to phase down to 20% in 2026 and disappear entirely in 2027. The One Big Beautiful Bill Act reversed that trajectory: bonus depreciation is 100% for qualifying property placed in service after January 19, 2025, and that rate is now permanent rather than subject to further phase-down.
At the same time, the 2026 Section 179 limit rose to a maximum deduction of $2,560,000, with the phase-out beginning once total qualifying property placed in service exceeds $4,090,000.
Section 179 vs. Bonus Depreciation: The Practical Difference
Both let a business deduct the cost of qualifying equipment and software in the year it’s placed in service, rather than depreciating it over several years, although they work differently:
Section 179
- Elective, you choose which assets and how much to expense
- Limited by the business’s taxable income for the year; unused amounts carry forward
- Subject to a phase-out once total qualifying purchases cross the threshold
- Useful for controlled, targeted expensing of specific assets
Bonus depreciation
- Applies automatically unless you elect out
- No dollar limit and no income limitation, it can create or increase a net operating loss
- Generally applied after Section 179 to the remaining eligible basis
The IRS requires Section 179 to be elected first, followed by bonus depreciation and then standard depreciation, which makes the order and timing of purchases important for planning purposes.
What Qualifies
Most tangible business equipment, machinery, computers, and off-the-shelf software qualify for both Section 179 and bonus depreciation. Vehicles follow separate, stricter rules: certain SUVs between 6,000 and 14,000 pounds GVWR are capped at $32,000 of first-year Section 179 deduction, with the remainder recovered through standard depreciation, and business-use percentage requirements apply throughout.
Why This Matters for Second-Half 2026 Purchase Timing
Because bonus depreciation is now permanent at 100% rather than phasing down, there’s less urgency to rush a purchase purely to “beat a deadline” the way there was under the old phase-down schedule. That said, timing still matters for a few reasons:
- “Placed in service” timing. The deduction is tied to when equipment is placed in service, not just ordered or paid for. Lead times on delivery and installation matter.
- Taxable income timing. Section 179 is limited to business taxable income for the year, so a purchase that makes sense in a high-income year may be less useful in a lower-income one.
- Cash flow. A large purchase made purely for tax reasons can strain cash flow even when the tax savings are real.
- Financing considerations. Purchases don’t need to be paid in full to qualify for the deduction in many cases, which changes the cash flow calculus for larger equipment purchases.
FAQ (Frequently Asked Questions)
What is the Section 179 deduction limit for 2026?
The maximum Section 179 deduction for 2026 is $2,560,000, with the phase-out beginning above $4,090,000 of total qualifying property placed in service.
Is bonus depreciation still 100% in 2026?
Yes. Bonus depreciation is 100% for qualifying property placed in service after January 19, 2025, and the One Big Beautiful Bill Act made that rate permanent rather than scheduling further phase-down.
Can I use both Section 179 and bonus depreciation on the same purchase?
Yes. The common approach is to apply Section 179 first for control over which specific assets are expensed, then apply bonus depreciation to any remaining eligible basis.
Does Section 179 have an income limitation?
Yes. Section 179 is limited by the business’s taxable income for the year, while bonus depreciation has no such limitation and can create or deepen a loss.
Should I buy equipment before year-end purely for the tax deduction?
Not without weighing cash flow impact. A deduction reduces tax owed, but it doesn’t cover the full cost of the purchase. A large purchase made purely for tax savings can still create a cash flow problem if it isn’t planned against your actual budget.
Considering an equipment or technology purchase before year-end? DDC can model the actual tax impact, including how Section 179 and bonus depreciation apply to your specific situation, before you commit. Talk to our team about your 2026 purchase plans.
This article is for general informational purposes and reflects our understanding of the rules in effect as of mid-2026. Confirm current limits and eligibility with your CPA before making purchasing decisions.