Section 179 & Bonus Depreciation Calculator 2026
The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for equipment acquired after January 19, 2025. Combined with the $2,560,000 Section 179 limit, most small businesses can deduct the full cost of equipment in year 1. See your deduction and estimated tax savings versus spreading the cost over 5–7 years under regular MACRS.
Calculate your 2026 Section 179 deduction
How Section 179 and bonus depreciation work in 2026
When you buy equipment for your business, the default IRS rule requires you to depreciate it over its "useful life" — typically 5 or 7 years under the Modified Accelerated Cost Recovery System (MACRS). Section 179 and bonus depreciation let you front-load that deduction into year 1 instead of spreading it over multiple years.
Section 179 — the mechanics for 2026
- 2026 deduction limit: $2,560,0001 — raised under OBBBA with inflation indexing going forward
- Phase-out: Reduces dollar-for-dollar once total qualifying property placed in service exceeds $4,090,000 (businesses spending $6.65M+ get $0 Section 179, but can still use bonus depreciation)
- Income limitation: Cannot exceed your net income from all active trades or businesses for the year. Unused Section 179 carries forward indefinitely
- Flexibility: You choose which assets and how much to deduct (partial amounts are allowed). This is the key advantage over bonus depreciation, which is all-or-nothing per asset class
- Eligible property: Equipment, machinery, computers, off-the-shelf software, certain vehicles, qualifying improvements to nonresidential real property (HVAC, roofing, fire protection, security systems)
Bonus depreciation — the mechanics for 2026
- Rate for OBBBA-eligible property: 100% for property both acquired AND placed in service after January 19, 2025 — permanent under OBBBA2
- Rate for pre-cutoff property: 20% bonus for property acquired before January 19, 2025 (TCJA phase-down schedule: 80% → 60% → 40% → 20% in 2026 for pre-cutoff)
- No income limitation: Unlike Section 179, bonus depreciation can create a net operating loss (NOL). The NOL carries forward and can offset up to 80% of taxable income in future years
- New and used property both qualify: Property doesn't need to be "original use" — purchased used equipment qualifies as long as it's new to you
- IRS guidance: Notice 2026-11 (January 14, 2026) provides rules and elections for the transition period3
Vehicle limits under § 280F (2026)
Vehicles face "luxury auto" caps under IRC § 280F regardless of purchase price. The limits apply even to a $30,000 sedan. Understanding the GVWR category determines your maximum first-year deduction:
| Vehicle type | Section 179 cap (2026) | Max first-year with bonus (OBBBA property) | Common examples |
|---|---|---|---|
| Light car or truck < 6,000 lbs GVWR | $12,2004 | $20,200 combined (+$8,000 bonus add-on) | Most sedans, small SUVs, compact trucks |
| Heavy SUV or crossover 6,001–14,000 lbs GVWR | $32,0004 | 100% of cost (100% bonus on remaining basis) | Chevy Tahoe, Ford Expedition, Cadillac Escalade, RAM 1500 |
| Heavy truck or van > 14,000 lbs GVWR | No § 280F cap | 100% of cost | Ford F-250/F-350, heavy cargo vans, most work trucks |
Check the window sticker GVWR (gross vehicle weight rating), not curb weight or towing capacity, to determine your category. More than 50% business use must be maintained for the entire recovery period — dropping below 50% in years 2–5 triggers depreciation recapture.
Want to model the full-year tax impact?
Section 179 decisions interact with S-corp reasonable salary, retirement plan contributions, QBI deduction, and quarterly estimated tax. A fee-only advisor who works with small-business owners sequences these for maximum first-year savings — no product sales, free match, no obligation.
Get matched free →The acceleration advantage: year 1 vs. spreading over 5 years
A sole proprietor earning $300,000 buys $85,000 of equipment in November 2026:
| Method | Year-1 deduction | Federal income tax saved (35% bracket) | SE tax saved | Total year-1 savings |
|---|---|---|---|---|
| Section 179 / 100% bonus | $85,000 | $29,750 | ~$2,960 | ~$32,710 |
| Regular 5-year MACRS (no election) | $17,000 (20%) | $5,950 | ~$590 | ~$6,540 |
| Acceleration advantage | +$68,000 | +$23,800 | +$2,370 | +$26,170 this year |
MACRS recovers the same $85,000 total over 5–6 years — the advantage of expensing is getting that cash now rather than later. At a 6% cost of capital, the NPV difference is roughly $9,000 on an $85,000 purchase. That's real money that can be reinvested immediately.
Year-end planning: the December 31 deadline
Equipment must be placed in service by December 31, 2026 — meaning operational and ready for business use. Ordered but not received, paid for but still uncrated, or delivered but not connected doesn't count. If you're buying equipment in Q4, confirm delivery, installation, and operational status before year-end. For vehicles, "placed in service" means the vehicle is driven for business — not just purchased.
How Section 179 interacts with the QBI deduction
A large Section 179 deduction in one year can reduce your qualified business income (QBI) — and therefore your § 199A deduction — for that year. If you're in the QBI phase-out range (above $201,775 single / $403,550 MFJ) and relying on W-2 wages to support the QBI deduction, a large Section 179 deduction doesn't directly reduce the W-2 wage component. But for businesses that are SSTB-limited or where the QBI deduction is already zero, this interaction doesn't matter. See the QBI Deduction Optimizer for the interaction with your specific situation.
Combining Section 179 with retirement contributions
For a sole proprietor, a $85,000 Section 179 deduction reduces Schedule C profit from $300,000 to $215,000. At $215,000, you can still contribute up to $72,000 to a solo 401(k) or SEP IRA. Combined, these two moves reduce taxable income by $85,000 + $72,000 = $157,000 — knocking someone in the 35% bracket down to 24% on their last dollar of income. The Self-Employed Tax Calculator can show you the full combined picture.
Frequently asked questions
What is the Section 179 deduction limit for 2026?
The 2026 Section 179 limit is $2,560,000. The deduction phases out dollar-for-dollar once total qualifying property placed in service exceeds $4,090,000 — businesses spending $6.65M+ on equipment receive $0 Section 179 but can still claim 100% bonus depreciation on the same assets.
How does Section 179 differ from bonus depreciation?
Section 179 is elective and asset-level: you choose which assets to deduct and in what amounts. It cannot exceed your net business income — it cannot create a loss. Bonus depreciation is automatic (you elect out, rather than in) and has no income limitation, so it can create a net operating loss (NOL) that carries forward indefinitely at 80% of taxable income per year. Standard practice: claim Section 179 first, then bonus depreciation on remaining basis — achieving 100% first-year write-off for most purchases.
What vehicles qualify for maximum Section 179 in 2026?
Heavy SUVs (GVWR 6,001–14,000 lbs) are capped at $32,000 for Section 179; with 100% bonus depreciation on the remaining basis, these can be fully expensed in year 1. Heavy trucks and vans over 14,000 lbs have no Section 179 cap — fully deductible. Light vehicles under 6,000 lbs GVWR are limited to $12,200 Section 179 plus $8,000 first-year bonus, a combined max of $20,200. Always verify GVWR on the window sticker, not curb weight or tow rating.
What is the bonus depreciation rate in 2026?
For property acquired and placed in service after January 19, 2025, the rate is 100% — permanently restored by the One Big Beautiful Bill Act (OBBBA, July 2025), per IRS Notice 2026-11. For property acquired before that date, the TCJA phase-down applies: 20% in 2026, 0% in 2027+.
Does Section 179 reduce self-employment tax?
Yes, for sole proprietors and single-member LLCs on Schedule C. Section 179 reduces Schedule C net profit, which is the basis for the 15.3% SE tax. An $85,000 deduction at $300,000 income saves roughly $2,960 in SE tax on top of income tax savings. S-corp owners do not get SE tax savings (distributions aren't subject to SE tax), but they still receive the full income tax benefit.
What is the Section 179 deadline for 2026?
Equipment must be placed in service by December 31, 2026 — operational and available for business use. Ordered but not received, delivered but not installed, or unboxed-but-not-connected does not qualify. For vehicles, placed in service means driven for business. The purchase or payment date does not determine eligibility; only the placed-in-service date counts.
Talk to a specialist before year-end
Section 179 and bonus depreciation decisions intersect with your overall tax strategy: retirement plan contributions, S-corp reasonable salary, QBI deduction optimization, and quarterly estimated payments. A fee-only advisor who specializes in self-employed and small-business clients helps you sequence these decisions to minimize total tax — not just this year but over a 5–10-year horizon.
- Section 179 2026 limit ($2,560,000) and phase-out threshold ($4,090,000): Section179.org — 2026 Deduction Limits · TS CPA — Section 179 Deduction 2026 New $2.56M Limit · Porter Brown — OBBBA Section 179 Changes
- Bonus depreciation 100% permanent restoration (OBBBA, July 2025) for property acquired after January 19, 2025: IRS Notice 2026-11 Guidance · RSM — OBBBA Restores and Expands Bonus Depreciation
- IRS interim guidance on OBBBA bonus depreciation transition rules: RSM — IRS Interim Guidance on OBBBA Bonus Depreciation · BDO — OBBBA Expands Depreciation Expensing
- Vehicle § 280F limits for 2026 ($12,200 light vehicles, $32,000 heavy SUV cap, $20,200 combined first-year with bonus): Section179.org — 2026 Vehicle Deduction Limits · Block Advisors — Section 179 Vehicle List 2026
Tax values verified against 2026 sources: OBBBA (July 2025), IRS Notice 2026-11 (Jan 14, 2026), IRS Rev. Proc. 2025-32, Section179.org. May 2026.