Section 179 vs Bonus Depreciation

Section 179 vs Bonus Depreciation: What’s the Difference?

If you purchase equipment, vehicles, software, or other assets for your business, you may qualify for powerful tax deductions. Two of the most valuable tools are Section 179 and Bonus Depreciation. While both allow you to write off asset purchases faster, the rules and benefits differ—and choosing the right strategy can significantly reduce your tax bill.

What Is Section 179?

Section 179 allows business owners to deduct the full cost of qualifying equipment in the year it’s placed in service, rather than depreciating it over several years.

Key Features

• You can deduct up to the annual limit (indexed yearly; typically over $1 million).
• Assets must be used more than 50% for business.
• Cannot create a loss—you can only deduct up to your taxable business income.
• Can apply to equipment, vehicles, software, machinery, certain improvements, and more.

Section 179 is ideal for businesses that want a large immediate deduction but do not want to create a loss for the year.

What Is Bonus Depreciation?

Bonus depreciation allows businesses to deduct a percentage of the cost of qualified assets in the first year. Historically this was 100%, but it is currently phasing down (80% for 2023, 60% for 2024, etc.) unless new tax laws change.

Key Features

• No dollar limit—you can use it on purchases of any size.
• Can be used to create or increase a loss.
• Applies to most tangible property with a useful life of 20 years or less.
• Can be used even if you’ve already maximized Section 179.

Bonus depreciation is extremely beneficial for businesses that want to reduce taxable income as much as possible—even below zero.

Section 179 vs Bonus Depreciation: Side-by-Side

FeatureSection 179Bonus DepreciationDeduction LimitAnnual limit (over $1M)No limitCan Create a Loss?NoYesBusiness Use Requirement> 50%> 50%New or Used?New or usedNew or usedApplies to Vehicles?Yes (limits apply)Yes (limits apply)

Which Should You Choose?

The right option depends on your business goals:

Choose Section 179 if:

• You want a large deduction but not a loss
• You’re buying only a moderate amount of equipment
• You want more control over how much deduction you take

Choose Bonus Depreciation if:

• You want the biggest deduction possible
• You’re purchasing high-cost assets
• You expect lower income in future years and want the deduction now
• You want to create a net operating loss (NOL)

In many cases, businesses use both—Section 179 first, then bonus depreciation on the remaining amount.

Vehicle Deductions Under Each Rule

Vehicles come with special restrictions. Large SUVs, trucks, and vans often qualify for much higher deductions, while passenger vehicles have caps.

Understanding which method maximizes your deduction can drastically change the tax impact of buying a new vehicle.

Planning Matters

Because these rules interact with taxable income, future projections, and your overall tax strategy, proper planning ensures you get the maximum benefit. Buying an asset at the right time—December vs. January, for example—can change your tax results.

Let Mytax.dog Help You Maximize Your Deduction

Choosing between Section 179 and bonus depreciation can be confusing, but you don’t have to figure it out alone. Mytax.dog can analyze your business income, asset purchases, and long-term tax goals to determine which deduction saves you the most money.
We’ll handle:

• Asset classification
• Depreciation planning
• Vehicle deduction strategies
• Filing everything accurately

Make your equipment purchases count—let Mytax.dog guide your tax strategy and file your return with confidence.

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