global Tax Section 179 vs. Bonus Depreciation: Which Tax Break Is Better for Your Business? October 27, 2026 Attention businesses…are you investing in equipment, machinery or technology? You may have an opportunity to take advantage of some valuable tax deductions. Learn how the OBBBA changed Section 179 and bonus depreciation and which tax break may be more advantageous for your business. Quick Takeaways Section 179 and bonus depreciation work differently. Section 179 has dollar and taxable-income limits, while 100% bonus depreciation generally does not. 100% bonus depreciation is back. The OBBBA permanently restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. Section 179 limits are higher. Businesses can deduct up to $2.5 million in qualifying property, with the deduction beginning to phase out once purchases exceed $4 million. Both can accelerate deductions. Each provision can help businesses reduce taxable income and improve cash flow by allowing faster write-offs of qualifying assets. State tax rules matter. Some states do not fully conform to federal bonus depreciation rules, which can affect which strategy makes the most sense. Why it mattersIf your business is investing in new equipment, machinery, computers, furniture, software, or other qualifying property, the timing of your depreciation deductions can have a significant impact on your tax liability and cash flow.Recent changes under the One Big Beautiful Bill Act (OBBBA) have made both bonus depreciation and Section 179 more valuable for businesses making capital investments. Understanding how the two provisions work (and where they differ) can help you make more informed purchasing and tax-planning decisions.100% Bonus DepreciationBonus depreciation is a tax strategy that allows businesses to deduct the cost of certain business assets faster than they normally could. Instead of spreading the deduction over several years, a business may be able to deduct 100% of the asset’s cost in the year it is placed in service.While the total amount you can deduct over the life of the asset doesn’t change, taking the deduction sooner can improve your business’s cash flow. Importantly, bonus depreciation is not subject to an annual dollar limit or income-based phaseout.What did OBBBA change?Prior to OBBBA, bonus depreciation was phasing out and was set to drop to 40% in 2025. With the new law, 100% bonus depreciation is now permanently reinstated for qualified property acquired and placed in service after January 19, 2025. This includes most tangible personal property with a recovery period of 20 years or less, such as land improvements, machinery, computers, and furniture and equipment.Businesses can now fully expense new and used assets in the year they are placed in service, rather than spreading deductions over several years.Section 179 Expensing IncreasesSection 179 of the U.S. tax code permits businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. The tax break is designed as an incentive to companies to invest in themselves and optimize their operations. While the deduction is open to all businesses with qualifying equipment, small business owners with tighter operating budgets may reap greater benefits of deducting the full purchase price from their gross income.What did OBBBA change?The OBBBA increased the maximum Section 179 deduction to $2.5 million for qualifying property placed in service in 2025 and indexed the amount for inflation in future years. The deduction begins to phase out when total qualifying property placed in service exceeds $4 million.This allows businesses to immediately expense a substantial amount of qualifying property rather than relying solely on bonus depreciation.Another important consideration is state tax treatment. While federal tax law permits 100% bonus depreciation, some states do not fully conform to federal bonus depreciation rules. Depending on the state, Section 179 may therefore provide a more favorable state tax result.Helpful chart explaining differences:Although both provisions allow businesses to accelerate deductions for qualifying property, there are several important differences. Section 179100% Bonus DepreciationMaximum deduction$2.5 million, subject to phaseoutNo annual dollar limitPhaseoutBegins when qualifying purchases exceed $4 millionNo comparable phaseoutTaxable-income limitationYesNoNew and used propertyGenerally yesGenerally yes, subject to eligibility requirementsAbility to select specific assetsYesGenerally applies to qualifying property unless an election out is madeState conformityGenerally more widely adopted by statesSome states do not conformCan create/increase a tax loss?Generally noGenerally yes
