Businesses that invest in equipment, vehicles, or other long-term assets may be able to deduct the full cost in the year the asset is placed into service, rather than depreciating it over several years. This immediate expensing is available through two key tax provisions: bonus depreciation under Internal Revenue Code Section 168(k) and the Section 179 election under IRC Section 179.
For 2026, bonus depreciation remains at a permanent 100 percent for qualifying property. In addition, Section 179 allows businesses to deduct up to $2,560,000 in qualifying purchases, subject to certain income and investment limits.
Bonus Depreciation and Net Operating Losses
One of the most significant advantages of bonus depreciation is that it is not limited by taxable income. If your deductions exceed your income for the year, the excess creates a net operating loss (NOL).
For example, a $500,000 equipment purchase against $300,000 in taxable income results in a $200,000 NOL. This loss can be carried forward indefinitely, although it can only offset up to 80 percent of taxable income in any future year.
This flexibility makes bonus depreciation especially valuable for businesses investing heavily during lower-income periods.
Section 179 Limits for 2026
Section 179 provides an additional opportunity for immediate expensing, but with defined limits. For 2026, the maximum deduction is $2,560,000, with a phase-out threshold beginning at $4,090,000 in total qualifying property placed in service.
Once a business exceeds the $4,090,000 threshold, the allowable deduction decreases dollar-for-dollar. At $6,650,000 in total qualifying purchases, the Section 179 deduction is completely eliminated.
Planning Ahead
Taking advantage of these provisions requires careful planning. Understanding how bonus depreciation and Section 179 interact, and how timing affects eligibility, can help businesses make informed decisions that optimize both cash flow and tax savings. Please consult with your tax adviser on how bonus depreciation can be utilized for your business.
Please consult with your tax advisor on how to utilize Section 179
