Before comparing Section 179 with bonus depreciation, verify the asset’s eligibility, acquisition and placed-in-service dates, business-use percentage, adjusted depreciable basis, and applicable tax year. Then check the taxpayer-wide Section 179 limits, business-income limitation, bonus rate, and elections. The methods are not mutually exclusive: the federal calculation generally applies Section 179 first, bonus depreciation second, and regular depreciation to the remaining basis. See the IRS Instructions for Form 4562.
Which inputs belong in a Section 179 vs. bonus depreciation comparison?
Build an asset-level record and a separate taxpayer-level limitation worksheet. An asset’s cost is not necessarily the same as the total property cost used to determine the Section 179 phaseout.
| Input | What to record | Why it changes the comparison |
|---|---|---|
| Tax year | Beginning and ending dates of the taxpayer’s tax year | Section 179 dollar limits apply to tax years beginning in the specified year. Do not select limits solely from the calendar year in which a return is filed. |
| Taxpayer and filing status | Sole proprietor, partnership, S corporation, or other corporation; individual filing status where relevant | Entity and owner limitations may both apply. Married taxpayers have special aggregation and allocation rules. |
| Asset description and class | Equipment, furniture, software, vehicle, qualified improvement property, or another specific category | Section 179 eligibility and bonus eligibility are separate determinations. A label such as “business asset” is insufficient. |
| Acquisition date and purchase terms | Acquisition date, binding-contract details, seller relationship, and prior use | These facts can affect bonus-depreciation timing and whether purchased or used property qualifies. |
| Placed-in-service date | Date the asset was ready and available for its intended business use | Paying for, ordering, or receiving an asset does not necessarily establish its depreciation year. |
| Business-use percentage | Supported business use, expressed as a percentage | Only the business portion is potentially deductible. Section 179 generally requires more than 50% business use; listed property has additional qualified-business-use rules. |
| Cost or other basis | Capitalized cost, including applicable acquisition and installation costs, with required adjustments | Invoice price, cash paid, loan payments, and depreciable basis are not interchangeable. |
| Section 179 elected amount | Amount selected for each eligible asset | Section 179 lets the taxpayer identify property and the cost elected for expensing, subject to applicable limits. |
| Total Section 179 property placed in service | Aggregate eligible property cost for the taxpayer’s tax year, following Form 4562 instructions | The phaseout is not limited to assets selected for Section 179 expensing. |
| Annual dollar limit and phaseout threshold | Amounts for the tax year being modeled | These determine the available Section 179 dollar limitation before the income limitation. |
| Business-income limitation | Income calculated under the applicable Form 4562 rules | This is not gross receipts, AGI, MAGI, or automatically the taxable income shown on an individual return. |
| Section 179 carryover | Prior-year disallowed deduction and supporting schedule | An income-limited elected deduction may carry forward; it must remain separately tracked. |
| Bonus eligibility and rate | Qualifying basis, acquisition and service dates, applicable percentage, and elections | Selecting a tax year alone does not establish the bonus percentage. |
| Remaining depreciation inputs | Recovery period, depreciation system, method, and convention | A balance left after immediate expensing may qualify for regular MACRS depreciation. |
| State jurisdiction | State return year, conformity rules, and depreciation adjustments | A federal deduction does not establish the state deduction. |
The federal input requirements and eligibility distinctions appear in Publication 946, chapters 1–5, and the Form 4562 instructions. Use purchase records, installation records, business-use logs, and prior depreciation schedules to support the entries.
Which asset categories need separate eligibility checks?
| Asset category | Section 179 check | Bonus-depreciation check |
|---|---|---|
| Purchased machinery, equipment, and furniture | Confirm eligible property acquired by purchase for active business use. | Confirm an eligible recovery period and the applicable acquisition and use requirements. |
| Used equipment | Check purchase and related-party restrictions. | Confirm the separate used-property requirements; “used” does not automatically mean eligible or ineligible. |
| Computer software | Determine whether it meets the Section 179 off-the-shelf software requirements. | Determine whether it qualifies under the applicable software rules. |
| Qualified improvement property | Confirm that the improvement actually meets the statutory definition. | Confirm qualification and whether required use of the alternative depreciation system affects eligibility. |
| Roofs, HVAC, fire-protection, alarm, and security improvements | Certain improvements to existing nonresidential real property may qualify through the Section 179 real-property election. | Section 179 eligibility alone does not make these improvements eligible for ordinary bonus depreciation. Classify the improvement separately. |
| Vehicles and other listed property | Check qualified business use, passenger-automobile limits, and any applicable SUV limit. | Check listed-property requirements and vehicle deduction limits; a bonus percentage does not override those limits. |
| Land and buildings | Land is not depreciable. An ordinary building purchase does not become Section 179 property merely because it is used in a business. | Ordinary building basis generally falls outside the usual Section 168(k) categories. The separate qualified-production-property allowance under Section 168(n) requires its own analysis. |
Use Publication 946 and the asset definitions in the Form 4562 instructions rather than assuming the two methods cover identical property.
Which tax-year limits and bonus rates should you enter?
Keep annual Section 179 amounts separate from the date-based bonus rules. The reference amounts below are labeled by year; select the row matching the taxpayer’s actual tax year rather than treating either row as a default.
| Section 179 field | Tax years beginning in 2025 | Tax years beginning in 2026 |
|---|---|---|
| Maximum deduction before other limitations | $2,500,000 | $2,560,000 |
| Property-cost threshold above which the dollar limit is reduced | $4,000,000 | $4,090,000 |
| Separate Section 179 limit for covered SUVs | $31,300 | $32,000 |
The IRS publishes these amounts in Publication 946, “What’s New for 2025” and “What’s New for 2026”. The SUV amount is a separate Section 179 restriction, not a universal cap on all depreciation for every vehicle.
Why do acquisition dates matter for bonus depreciation?
Public Law 119-21, commonly called the One Big Beautiful Bill Act, restored a 100% bonus-depreciation allowance for certain qualified property acquired and placed in service after January 19, 2025. An older phase-down schedule should not be applied automatically to property that meets the restored allowance’s requirements.
| Property and timing | Federal bonus treatment to check |
|---|---|
| Certain qualified property acquired and placed in service after January 19, 2025 | Generally eligible for the restored 100% allowance, subject to property requirements, exceptions, and elections. |
| Ordinary qualified property acquired after September 27, 2017, but before January 20, 2025, and placed in service during calendar year 2025 | Generally subject to the 40% allowance for 2025. |
| Certain long-production-period property and aircraft within the older acquisition rules, placed in service during calendar year 2025 | Special 60% treatment may apply for 2025; separate requirements must be checked. |
| Eligible property within the restored allowance during the first tax year ending after January 19, 2025 | A transition election may permit 40% instead of 100%, or 60% for qualifying long-production-period property and certain aircraft. |
These rules appear in Publication 946, chapter 3, and the 2025 Form 4562 instructions, line 14. Contract timing, self-construction, and specialized property can require additional analysis; an invoice date alone may not resolve acquisition timing.
For a different tax year or a transition situation not shown above, retrieve that year’s applicable instructions through the IRS Form 4562 page. Do not extrapolate a rate from a previous year.
How do the Section 179 phaseout and income limitation work?
The Section 179 phaseout reduces the annual dollar limit dollar for dollar when total qualifying property cost exceeds the applicable threshold.
For a basic comparison without special allocations or increased limits:
[
L_{\text{available}}
=
\max\left(0,\ L-\max(0,\ P-T)\right)
]
Where:
- (L) is the annual Section 179 dollar limit, in dollars.
- (P) is the total cost of Section 179 property placed in service during the tax year, determined under the Form 4562 rules.
- (T) is the applicable phaseout threshold, in dollars.
- (L_{\text{available}}) is the dollar limit remaining before the business-income limitation.
Include eligible property in (P) even when no Section 179 deduction is elected for that property. The Form 4562 instructions for lines 2 and 3 explain the aggregation requirement.
The business-income limitation is a separate restriction. For an individual, the calculation can include income from actively conducted businesses and employee compensation, with specified adjustments. On a joint return, the applicable income calculation combines the spouses’ amounts. It is therefore inaccurate to substitute either gross business revenue or one business’s unadjusted profit without checking the instructions.
For a straightforward current-year purchase with no carryover, the deduction cannot exceed the eligible elected cost, available dollar limit, or applicable business-income limit. Prior-year carryovers, vehicle limits, and pass-through items require additional steps. Partnerships and S corporations can face limitations at both the entity and owner levels. See Publication 946, chapter 2.
Bonus depreciation does not have the same Section 179 annual dollar phaseout or business-income limitation. It can create or increase a loss, but other provisions may restrict whether the resulting loss is currently deductible. A larger depreciation deduction is not necessarily a larger immediately usable tax benefit.
How should remaining basis be carried through the comparison?
For a newly purchased eligible asset with no special basis adjustments, begin with:
[
B=C\times u
]
Where (C) is capitalized cost in dollars and (u) is the supported business-use proportion expressed as a decimal.
If the remaining basis is fully eligible for bonus depreciation:
[
D_{\text{bonus}}=(B-S)\times r
]
[
B_{\text{MACRS}}=B-S-D_{\text{bonus}}
]
Here, (S) is the Section 179 basis reduction applicable to the asset, (r) is the verified bonus rate expressed as a decimal, and (B_{\text{MACRS}}) is the basis remaining before regular depreciation. When an elected Section 179 amount is limited and carried forward, follow the IRS basis and carryover rules rather than treating the deferred amount as fresh bonus-eligible basis.
“Remaining basis” needs a label. Basis remaining after Section 179 is not the same as basis remaining after bonus depreciation, and neither necessarily equals year-end adjusted basis after regular depreciation. The Form 4562 instructions specify that bonus depreciation follows Section 179 and precedes regular MACRS depreciation.
What does a complete equipment comparison look like?
Consider a hypothetical calendar-year 2025 sole proprietor filing as single who purchases and places an $80,000 machine in service on July 1, 2025.
Assume:
- The machine is purchased from an unrelated seller after January 19, 2025.
- It is used entirely in an actively conducted business and qualifies for both methods.
- It is five-year MACRS property using the general depreciation system, the 200% declining-balance method, and the half-year convention.
- Total Section 179 property placed in service during 2025 is $80,000.
- The properly computed Section 179 business-income limit is $50,000.
- There are no prior Section 179 carryovers, credits requiring basis reductions, vehicle restrictions, or other basis adjustments.
- The Section 179-only alternative includes a valid election out of bonus depreciation for the relevant property class.
The annual dollar limit does not constrain this purchase: total eligible cost is below the 2025 phaseout threshold, and the asset’s cost is below the 2025 maximum deduction. The assumed business-income limit constrains the current Section 179 amount. The qualifying machine is eligible for the restored 100% bonus allowance under the stated 2025 acquisition and service dates.
| Calculation | Section 179 only, with bonus elected out | Bonus only | Section 179 followed by bonus |
|---|---|---|---|
| Initial business-use basis | $80,000 | $80,000 | $80,000 |
| Section 179 elected and currently deductible | $50,000 | $0 | $50,000 |
| Basis after Section 179 | $30,000 | $80,000 | $30,000 |
| Bonus deduction | $0 | $80,000 | $30,000 |
| Basis before regular MACRS depreciation | $30,000 | $0 | $0 |
| Regular first-year MACRS deduction | $6,000 | $0 | $0 |
| Total first-year depreciation deductions | $56,000 | $80,000 | $80,000 |
| Year-end adjusted depreciable basis | $24,000 | $0 | $0 |
The Section 179-only calculation is:
- Elect $50,000, equal to the assumed available business-income limitation.
- Subtract that amount from the $80,000 basis, leaving $30,000.
- Apply the 20% first-year MACRS percentage for the assumed five-year property and half-year convention: $30,000 × 20% = $6,000.
- Add $50,000 and $6,000 for $56,000 of first-year depreciation deductions.
- Subtract $56,000 from $80,000 to obtain $24,000 of year-end adjusted depreciable basis.
The MACRS percentage comes from Publication 946, Appendix A, Table A-1. All example calculations produce exact whole-dollar amounts, so no rounding adjustment is needed.
The other alternatives both recover the full $80,000 basis in the first year under the stated assumptions. That does not establish an $80,000 currently usable loss, a particular refund, or a tax-savings amount. The comparison stops before other loss limitations and the complete federal and state return calculations.
How do you enter these facts into the site’s calculators?
Section 179 calculator: check aggregation before relying on the result
The Section 179 Deduction Calculator multiplies entered asset cost by business use, calculates a phaseout from that business cost, and limits the deduction using the entered annual dollar and income limits. It does not have separate inputs for total taxpayer-wide property additions, the elected amount, or prior-year carryovers.
That distinction matters when comparing one asset within a larger equipment purchase program. The calculator’s phaseout calculation does not separately incorporate other qualifying property placed in service during the year. Determine the aggregate limitation outside the tool; do not treat its single-asset result as a complete Form 4562 calculation. Its displayed dollar-limit and threshold examples also need to be replaced with the amounts applicable to the selected tax year.
Bonus calculator: enter the basis remaining after Section 179
The Bonus Depreciation Calculator multiplies asset basis by the entered business-use percentage, qualifying-property percentage, and bonus rate. Its tax-year selection does not automatically determine the legally applicable rate, and it has no separate Section 179 deduction field.
When modeling bonus after Section 179, carry forward only the properly determined remaining basis. In the combined hypothetical example, enter $30,000 of remaining business basis and 100% business use, with 100% qualifying property and the verified 100% bonus rate. Do not enter the original $80,000 again. If a basis has already been reduced to its business portion, applying the original mixed-use percentage again would understate it.
Both tools provide scenario estimates from entered assumptions. They do not review purchase records, establish eligibility, make elections, or prepare or file Form 4562.
Which additional fields matter before treating the deduction as tax savings?
A deduction is not a dollar-for-dollar reduction in tax. Both calculators translate deductions into illustrative savings using an entered marginal tax rate. That rate is not an effective tax rate, and multiplying the deduction by one rate does not reproduce a complete return calculation.
For a sole proprietor, deductible business depreciation can also affect qualified business income. The Form 8995 instructions require relevant business deductions to be considered in determining QBI and distinguish currently allowed deductions from suspended deductions. Form 8995 is a downstream QBI calculation, not the source for Section 179 dollar limits or bonus-depreciation rates.
Before converting the comparison into a tax estimate, retain these additional fields:
- Filing status and taxable income for the applicable tax year.
- Whether a deduction is currently allowed or suspended under another limitation.
- QBI information and the appropriate Form 8995 or Form 8995-A calculation.
- State depreciation adjustments and a separate state basis schedule where required.
- Expected changes in business use and potential disposition or recapture consequences.
Business use falling to 50% or less during the applicable recovery period can trigger Section 179 recapture; listed-property rules can also require recapture of excess depreciation. Keep the supporting use records after the first-year deduction. See Publication 946, chapters 2 and 5.
For state treatment, consult the applicable state revenue department’s instructions for the return year and any depreciation-adjustment schedule. The federal Form 4562 instructions specifically recognize that additional state depreciation records may be necessary; neither calculator determines state conformity.