Section 179 and bonus depreciation estimator.

How it is calculated

Order of deductions: (1) Section 179 = the lesser of the eligible cost, the dollar limit after phase-out, and your business taxable income. The dollar limit is the maximum ($2,560,000 for 2026, $2,500,000 for 2025) reduced dollar for dollar by the cost of qualifying property over the threshold ($4,090,000 for 2026, $4,000,000 for 2025). (2) Bonus depreciation = the chosen percentage of the cost left after Section 179. (3) First-year MACRS = the Table A-1 half-year rate (3-year 33.33%, 5-year 20.00%, 7-year 14.29%, 10-year 10.00%) on what remains. A Section 179 amount blocked by the income limit carries forward to the next year.

Worked example

$120,000.00 of 7-year equipment, 100% business use, 100% bonus depreciation, 2026: Section 179 takes $120,000.00, bonus depreciation the other $0.00, a total first-year deduction of $120,000.00 and, at a 25% rate, a tax saving of $30,000.00. If taxable business income is only $50,000 and bonus is off, Section 179 is limited to $50,000 ($70,000.00 carries forward) and first-year MACRS adds $10,003.00. At $4,590,000.00 of 2026 purchases the dollar limit drops to $2,060,000.00. With a $80,000 heavy SUV in 2025 the Section 179 amount for it is capped at $31,300, so the property's Section 179 total is $51,300.00.

Sources and limits

Figures come from the IRS: Publication 946, How To Depreciate Property (2025), "What's New for 2025" and "What's New for 2026" (maximum deduction, phase-out threshold and heavy SUV cap), Chapter 2 (business income limit, more-than-50% business use, carryover), Chapter 3 (special depreciation allowance, including the 100% allowance reinstated for property acquired after January 19, 2025 and the 40% allowance for property acquired before January 20, 2025 and placed in service in 2025) and Table A-1. Retrieved 2026-10-16.

Not modelled: mid-quarter convention (applies when more than 40% of the year's depreciable basis is placed in service in the last quarter), qualified real property, listed-property rules at or below 50% business use, married-filing-separately limits, partnership and S-corporation pass-through limits, state conformity, depreciation recapture and the other special allowances. The phase-out here uses the business cost entered. Ask a tax professional before you file.

FAQ

What is the Section 179 limit for 2026?

IRS Publication 946 gives a maximum deduction of $2,560,000 for tax years beginning in 2026, reduced by the amount that qualifying property placed in service exceeds $4,090,000. The heavy SUV cap is $32,000.

Section 179 or bonus depreciation: which comes first?

Section 179 comes first. Special depreciation applies to the cost remaining after any Section 179 deduction, and regular MACRS applies to what is left after that.

Why is my Section 179 deduction smaller than my cost?

Three limits can bite: the dollar limit (reduced when you buy more than the threshold), your taxable business income, and the heavy SUV cap. Any amount blocked by the income limit carries forward.

Does used equipment qualify?

Section 179 requires property acquired by purchase, so used equipment can qualify while gifts and inheritances do not. Pub. 946 also lists purchases that do not count, such as certain related-party purchases. Bonus depreciation applies to new property and certain used property.