September 6, 2026 · Equipment Capital Index
Section 179 and 100% Bonus Depreciation for Equipment in 2026: What Actually Changed
If you bought equipment any time in the last few years, you probably learned to think about Section 179 first and bonus depreciation second — mostly because bonus depreciation was on a scheduled phase-down (80% in 2023, 60% in 2024, on a path toward 0%) and Section 179 was the more reliable full write-off. That ordering is now backwards, and a lot of financing guidance still circulating online hasn’t caught up.
What actually changed
The One Big Beautiful Bill Act, signed in 2025, restored 100% bonus depreciation for qualifying equipment placed in service after January 19, 2025. That’s not a return to the old pre-2023 baseline as a temporary measure — it’s a permanent restoration, with no scheduled phase-down this time. Separately, the Section 179 deduction limit for 2026 is $2,560,000, with the phase-out beginning once total qualifying purchases exceed $4,090,000 in a year (see IRS Publication 946 for the underlying statute).
The practical effect: for the overwhelming majority of equipment buyers — anyone financing a single machine or a small fleet well under the Section 179 cap — the two provisions now produce the same first-year outcome (100% of the purchase price deducted immediately), which means the historical reason to obsess over Section 179’s eligibility rules specifically has mostly disappeared. Bonus depreciation is broader: it doesn’t have Section 179’s income limitation (Section 179 can’t deduct more than your business’s net taxable income for the year; bonus depreciation can create or add to a net operating loss), and it doesn’t phase out based on total annual equipment spend.
Where the two provisions actually differ
| Section 179 | Bonus Depreciation (2026) | |
|---|---|---|
| First-year deduction rate | Up to 100%, elected item by item | 100%, generally automatic unless you opt out |
| 2026 cap | $2,560,000, phases out above $4,090,000 in total purchases | No dollar cap |
| Limited by taxable income | Yes — can’t exceed net business income | No — can create/increase a net operating loss |
| Used equipment | Eligible (has been since 2018) | Eligible (has been since 2018) |
| Requires an election | Yes, on Form 4562 | Can be elected out of, but applies by default |
The income limitation is the one that actually bites in practice. A business with a light income year that buys a $400,000 excavator can’t use Section 179 to deduct more than its net income allows — the disallowed portion carries forward. Bonus depreciation has no such ceiling, which is why, for a buyer in that exact situation, bonus depreciation is doing the real work even if Section 179 gets more attention in dealer financing pitches.
A worked example
Take a $185,000 mid-size wheel loader, placed in service in March 2026, financed with a 20% down payment:
- Financed amount: $148,000 (20% down on $185,000)
- Section 179 election: fully eligible, well under the $2,560,000 cap — the buyer could deduct the full $185,000 in year one, limited only by net business income
- If the buyer’s net income this year is only $120,000: Section 179 alone caps the deduction at $120,000, with $65,000 carried forward to next year
- Bonus depreciation instead: the full $185,000 is deductible in year one regardless of net income, potentially creating a net operating loss that carries back or forward depending on the buyer’s situation
This is precisely the calculation every equipment financing page on this site runs against the specific machine’s actual price — see the “tax impact” section on any individual machine page for the exact first-year deduction math for that unit, or the full methodology for how we compute it.
What this doesn’t cover
This is general federal tax information, not advice for your specific return. It doesn’t account for state conformity (several states don’t fully conform to federal bonus depreciation rules and require an addback), alternative minimum tax interactions, or entity-specific limitations for partnerships and S-corps. Confirm the actual numbers with a CPA before making a purchase decision based on this — the point of this post is explaining which provision does the work in your situation, not replacing the person who signs your return.
See real financing estimates for heavy construction .