Asset Tax Write-Offs: Section 179, Bonus Depreciation, and MACRS

Businesses claim tax write-offs for asset purchases through four main routes for 2026: expensing small items under the de minimis safe harbor, electing Section 179 to deduct up to $2,560,000 immediately, taking 100 percent bonus depreciation restored by the One, Big, Beautiful Bill Act, or spreading the cost across years using MACRS. Which route makes sense for a given business asset tax write-off depends on the price, the type of property, and whether the deduction would exceed your taxable income.

What Counts as a Deductible Business Asset

An asset has to pass four tests before you can write off any part of it. You need to own the property, use it in your business or to produce income, be able to show it has a limited useful life, and expect it to last more than one year.¹ That last piece is what separates depreciable assets from ordinary supplies you expense right away.

Tangible property covers machinery, computers, office furniture, trucks, and manufacturing equipment. Intangible property includes patents, copyrights, trademarks, and customer lists picked up when buying another business. Both are deductible, but through different methods. Land is never depreciable because it doesn’t wear out.² Buildings sitting on that land are.

Timing matters too. An asset qualifies in the year it is “placed in service,” meaning ready and available for use.¹ Buying equipment in December and installing it in January pushes the deduction into the next tax year. Property used only for personal purposes and inventory held for resale don’t qualify. When you use an asset for both business and personal purposes, only the business-use share is deductible.

Small Purchases: The De Minimis Safe Harbor

Low-cost purchases often skip depreciation entirely. Under the de minimis safe harbor, you can expense the full cost of an item the year you buy it if the cost falls below certain thresholds. Businesses with audited financial statements (what the IRS calls an “applicable financial statement”) can use $5,000 per invoice or item. Without those statements, the limit is $2,500 per item.³

To use it, attach a statement titled “Section 1.263(a)-1(f) de minimis safe harbor election” to your return for that year. The election covers every qualifying purchase during the year, not selected ones, and you make the choice annually.³ For laptops, tools, or minor office equipment, this is usually the simplest path.

Section 179 Immediate Expensing

Section 179 lets you deduct the full purchase price of qualifying business property in the year it goes into service. For 2026, the maximum deduction is $2,560,000, and the benefit phases out dollar-for-dollar once total qualifying purchases exceed $4,090,000.⁴ Those figures are inflation-adjusted annually from the base amounts of $2,500,000 and $4,000,000 set by the One, Big, Beautiful Bill Act.⁵

One key constraint: a Section 179 deduction cannot create or increase a net operating loss. Your deduction is capped at the business’s taxable income for the year. Any unused portion carries forward. Heavy SUVs (vehicles rated between 6,001 and 14,000 pounds gross vehicle weight) face a separate cap of $32,000 for 2026.⁴ That limit doesn’t apply to pickup trucks with full-size cargo beds or vans that seat more than nine passengers behind the driver.

100 Percent Bonus Depreciation

The One, Big, Beautiful Bill Act restored 100 percent bonus depreciation for qualifying business property acquired after January 19, 2025. That means you can deduct the entire cost of eligible new or used equipment in the first year.⁶ The IRS has confirmed the 100 percent rate is permanent under the new law, replacing the phasedown that had been shrinking the deduction by 20 percentage points each year since 2023.⁷

Bonus depreciation has no cap on the total dollar amount and can generate a net operating loss. Section 179 is an election you make asset by asset; bonus depreciation applies automatically to all eligible property unless you elect out of it for an entire class of assets. Businesses with little or no taxable income in the current year sometimes prefer Section 179’s carryforward over bonus depreciation’s ability to create a loss. Businesses making very large investments usually prefer bonus depreciation because it has no ceiling.

MACRS Schedules for Everything Else

When you don’t expense an asset in full through Section 179 or bonus depreciation, the Modified Accelerated Cost Recovery System takes over. MACRS assigns each type of property to a recovery-period class that sets how many years of deductions you take.¹ The most common classes:

5-year property: automobiles, light trucks, computers, office machinery, and research equipment.¹
7-year property: office furniture and fixtures, agricultural machinery, railroad track, and anything that doesn’t fit another class.¹
15-year property: qualified improvement property and land improvements like fences and parking lots.
27.5-year property: residential rental buildings.
39-year property: nonresidential commercial buildings.

Most businesses use the General Depreciation System, which applies a declining-balance method that front-loads deductions into the earlier years. The half-year convention treats the asset as placed in service at the midpoint of the year, giving you half a year’s depreciation in year one. If more than 40 percent of your total depreciable property for the year was placed in service in the last three months, you switch to the mid-quarter convention instead.⁸

Vehicle and Listed Property Caps

Vehicles and other assets the IRS treats as prone to personal use get extra scrutiny. “Listed property” must be used more than 50 percent for business to qualify for Section 179 or accelerated MACRS. If business use later drops to 50 percent or less, you face recapture: some of the excess depreciation you claimed in prior years gets added back as income.⁹

Passenger automobiles hit annual depreciation caps that limit how much you can deduct even when the vehicle costs far more. For passenger vehicles placed in service in 2026 where 100 percent bonus depreciation applies, the limits are:

Year 1: $20,300
Year 2: $19,800
Year 3: $11,900
Each year after: $7,160¹⁰

Without bonus depreciation, the first-year limit drops to $12,300; the later-year limits stay the same.¹⁰ A $60,000 sedan takes many years to fully depreciate under these caps. Heavy vehicles over 6,000 pounds gross vehicle weight avoid the passenger auto caps, which is why large SUVs and pickup trucks are popular business purchases. Those vehicles are still subject to the $32,000 Section 179 SUV cap, but they can use bonus depreciation on the remaining cost without annual limits.⁴

Renovations and Interior Improvements

If you renovate the interior of a commercial building you own or lease, those improvements may qualify as qualified improvement property with a 15-year MACRS recovery period. QIP covers most interior work on nonresidential buildings but excludes building enlargements, elevators, escalators, and changes to the structural framework.⁸ The improvement must be made after the building was originally placed in service, and it must be made by the current taxpayer, not a prior owner.

Because QIP carries a 15-year recovery period, it qualifies for both 100 percent bonus depreciation and Section 179 expensing. A business spending $500,000 to renovate a leased office or retail space can potentially deduct the entire amount in year one. QIP does not apply to residential rental property; a building counts as residential if 80 percent or more of its gross rental income comes from dwelling units.

Intangibles Acquired With a Business

Intangible assets you get as part of buying another business follow a separate track under Section 197. They are amortized straight-line over 15 years regardless of how long you actually expect to use them.¹¹ You deduct one-fifteenth of the acquisition cost each year, prorated by month if you acquire the asset partway through the year.

Section 197 covers goodwill, going concern value, customer and supplier relationships, patents and other intellectual property, trademarks and franchises, government-granted licenses and permits, and covenants not to compete tied to an acquisition.¹¹ The rule only applies to acquired intangibles. If your business creates a patent or builds a customer list from scratch, different rules apply. Self-developed software, for example, may be depreciable over three years or expensed under Section 179 instead of amortized over 15.

Filing the Write-Off on Your Return

IRS Form 4562 is where depreciation, amortization, and Section 179 elections get reported. The form breaks out by method:¹²

Part I: Section 179 elections, listing each asset and the dollar amount.
Part II: the special (bonus) depreciation allowance for qualifying property.
Part III: MACRS depreciation, classifying each asset into its recovery period and calculating the annual deduction.

For each asset, you need the description, date placed in service, total cost basis (including sales tax, delivery, and installation), and business-use percentage. If an asset is used partly for personal purposes, only the business share is deductible.

Form 4562 attaches to whatever return your business files. Sole proprietors include it with Schedule C on Form 1040. Corporations report depreciation on line 20 of Form 1120.¹³ Partnerships and S corporations use their respective entity returns.

What Happens When You Sell the Asset

Selling business equipment for a gain triggers depreciation recapture. Under Section 1245, the portion of the gain attributable to prior depreciation deductions is taxed as ordinary income, not at the lower capital gains rate.¹⁴ The recapture amount is the lesser of the total depreciation you took or the gain you realized.

Section 179 deductions get the same treatment. If you expensed a $50,000 machine immediately under Section 179 and later sell it for $30,000, you owe ordinary income tax on the full $30,000 gain.¹⁴ Recapture also kicks in when listed property’s business use falls to 50 percent or less, even without a sale.⁹

You report the sale on Form 4797, which separates the ordinary income recapture from any remaining gain that might get capital gains treatment.¹⁵ Recapture doesn’t make the deduction a bad move. You still got the time-value benefit of deferring taxes for the years you held the asset. But if you’re planning to sell appreciated equipment, build the recapture tax into your proceeds estimate so it doesn’t catch you off guard.

1
Internal Revenue Service. Publication 946 – How To Depreciate Property
2
Internal Revenue Service. What Small Business Owners Should Know About the Depreciation of Property Deduction
3
Internal Revenue Service. Tangible Property Final Regulations
4
Internal Revenue Service. Rev. Proc. 2025-32
5
Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
6
Internal Revenue Service. One, Big, Beautiful Bill Provisions
7
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill
8
Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System
9
Internal Revenue Service. Instructions for Form 4562
10
Internal Revenue Service. Rev. Proc. 2026-15
11
Office of the Law Revision Counsel. 26 USC 197 – Amortization of Goodwill and Certain Other Intangibles
12
Internal Revenue Service. Form 4562 – Depreciation and Amortization
13
Internal Revenue Service. Form 1120 – U.S. Corporation Income Tax Return
14
Office of the Law Revision Counsel. 26 USC 1245 – Gain From Dispositions of Certain Depreciable Property
15
Internal Revenue Service. Instructions for Form 4797 – Sales of Business Property