Can You Take Bonus and 179 on the Same Asset?

Yes, you can claim bonus depreciation and Section 179 on the same asset. The IRS requires a specific order: apply your Section 179 election first, which reduces the asset’s basis, then apply bonus depreciation to what remains, and finally depreciate any leftover balance under MACRS over the asset’s recovery period. Used together, the two deductions can eliminate the full cost of a qualifying purchase in the year you place it in service.

Why Combine the Two When Bonus Is Already 100 Percent

With bonus depreciation restored permanently to 100 percent for property acquired after January 19, 2025, it is fair to ask why Section 179 still matters. The answer is control.

Section 179 is an asset-by-asset election. You pick which specific items to expense and decide exactly how much of each item’s cost to include, up to the annual cap. Bonus depreciation is the opposite: it applies automatically to every qualifying asset within a recovery-period class unless you affirmatively opt out, and the opt-out covers the entire class rather than individual items.¹

The two also differ on losses. Section 179 cannot exceed your active business taxable income for the year; any excess carries forward. Bonus depreciation has no income floor and can generate or increase a net operating loss.² Layering them lets you set the deduction on chosen assets with Section 179 and let bonus depreciation sweep up the rest, fine-tuning both the total write-off and whether you generate a loss.

The Required Order of Calculation

The IRS is clear on the sequence, and running it in a different order produces the wrong numbers.³

Take the asset’s cost, adjusted for business-use percentage. Subtract the Section 179 amount you elect. The result is the tentative basis.
Multiply the tentative basis by the applicable bonus depreciation percentage. For most qualifying property acquired after January 19, 2025, that percentage is 100 percent. Subtract the result from the tentative basis.
If any balance remains, depreciate it over the asset’s MACRS recovery period.

A worked example: a business buys $500,000 of equipment in 2026 and elects a $200,000 Section 179 deduction. The tentative basis is $300,000. At 100 percent bonus, the full $300,000 is deducted in the same year. Nothing remains for MACRS, and the business writes off all $500,000 up front.

You could reach the same result by electing $500,000 under Section 179 alone, well within the 2026 cap. But that only works if your active business taxable income is at least $500,000. If it falls short, part of the Section 179 deduction carries forward instead of hitting this year’s return. Running Section 179 up to a comfortable level and letting bonus handle the rest sidesteps that limit.

Both deductions are reported on Form 4562 with your income tax return for the year the asset is placed in service.⁴

Section 179 Limits for 2026

The One Big Beautiful Bill Act, signed August 4, 2025, raised the Section 179 caps and made the higher figures permanent with annual inflation indexing.⁵ After inflation adjustments, the 2026 amounts are:

Maximum deduction: $2,560,000
Phase-out threshold: $4,090,000 (the deduction drops dollar-for-dollar once qualifying property placed in service exceeds this amount)
SUV cap: $32,000 for sport utility vehicles rated between 6,000 and 14,000 pounds gross vehicle weight

⁶

Section 179 is capped by your total taxable income from active business operations. Elect $200,000 against $150,000 of business income and only $150,000 is used this year; the $50,000 balance carries forward indefinitely.

Bonus Depreciation After the One Big Beautiful Bill Act

The phase-down schedule that had been shrinking bonus depreciation from 100 percent toward zero no longer applies to property acquired after January 19, 2025. The law now allows a first-year deduction equal to 100 percent of the adjusted basis of qualified property acquired and placed in service after that date.⁷⁸

There is no dollar cap and no taxable income floor on bonus depreciation. The trade-off is the loss of granular control: an opt-out applies to the whole class of property, not individual assets within it.

What Qualifies for Both

An asset generally qualifies for both Section 179 and bonus depreciation if it meets all of the following:

It is tangible personal property, such as machinery, equipment, furniture, or off-the-shelf computer software (software available to the public under a standard, unmodified license).
Its MACRS recovery period is 20 years or less. Most equipment sits in the five-year or seven-year class.
If it is qualified improvement property, it consists of interior improvements to a nonresidential building placed in service after the building itself, and it does not enlarge the building, add elevators or escalators, or alter the structural framework.
Business use exceeds 50 percent. Only the business-use portion of the cost is eligible if you also use the asset personally.
It is placed in service — ready and available for its intended business function — before your tax year ends.

Used equipment can qualify for both. For bonus depreciation on used property, you cannot have used the asset yourself before acquiring it, you cannot buy it from a related party, and you cannot receive it in a like-kind exchange.⁷

Property that must be depreciated under the alternative depreciation system — including assets used predominantly outside the United States and certain tax-exempt use property — is ineligible for bonus depreciation. Land, inventory, and property held for investment rather than active business use are excluded from both deductions.

Special Rules for Vehicles

Passenger automobiles, which the IRS defines to include trucks and vans, are subject to annual luxury-vehicle dollar caps that limit depreciation regardless of the vehicle’s actual cost. For vehicles placed in service in 2025, the first-year cap is $20,200 with bonus depreciation and $12,200 without. The 2026 figures had not been released as of this writing.

Sport utility vehicles rated between 6,000 and 14,000 pounds gross vehicle weight sit in a middle tier. Section 179 for these SUVs is capped at $32,000 for 2026, far below the general Section 179 limit.⁶ Bonus depreciation can still be claimed on the cost that remains after the $32,000 Section 179 cap. Vehicles rated above 14,000 pounds fall outside the passenger automobile definition and face no luxury cap, so they can absorb the full Section 179 and bonus depreciation amounts.

Making the Election Versus Opting Out

Section 179 requires you to affirmatively elect it, asset by asset, on Form 4562. The election is made with your original return for the year the asset is placed in service or with an amended return filed within the time allowed by law.⁹ Once made, it generally cannot be revoked without IRS consent, which is granted only in extraordinary circumstances.¹⁰

Bonus depreciation works the other way. It applies by default to every qualifying asset. If you do not want it for a given class of property, you attach a statement to your timely filed return (including extensions) identifying the class and stating that you are electing out. That opt-out covers all qualifying assets in the class placed in service during the year, not just the ones you might prefer to exclude.¹

Recapture When You Sell or Reduce Business Use

Front-loading depreciation shifts timing; it does not erase tax. When you later sell equipment that was expensed under Section 179 or bonus depreciation, gain is generally treated as ordinary income under Section 1245 recapture rules. The ordinary income portion equals the lesser of the depreciation previously allowed or the total gain realized on the sale.¹¹

Suppose you bought equipment for $200,000, deducted the full amount in year one, and later sold it for $60,000. The entire $60,000 gain is ordinary income. If you sold for $250,000, the first $200,000 of gain is ordinary income (recapturing the depreciation) and only the remaining $50,000 might qualify for capital gains treatment.

Business use also has to hold up. If your business use of the asset drops to 50 percent or below in any year during the MACRS recovery period, you must recapture the excess of the depreciation you claimed over what straight-line depreciation would have allowed, and include that amount in income for the year the use dropped. The asset then moves to the alternative depreciation system for the balance of its recovery period.³

State Tax Treatment Does Not Always Follow

Federal Section 179 and bonus depreciation do not automatically carry over to your state return. States vary: some conform to current federal rules, some freeze conformity to the tax code as of a particular date, and some selectively decouple from provisions they consider too expensive. Several states, including California, Illinois, and Michigan, took legislative action in 2025 to decouple from the One Big Beautiful Bill Act’s restoration of 100 percent bonus depreciation.

In a decoupled state, you may need to add back the federal deduction and depreciate the asset over its full recovery period for state purposes, creating a separate state depreciation schedule for each affected asset. State conformity changes often, so confirm your state’s current position before filing.

1
Internal Revenue Service. Additional First Year Depreciation Deduction (Bonus) FAQ
2
Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
3
Internal Revenue Service. Publication 946, How To Depreciate Property
4
Internal Revenue Service. About Form 4562, Depreciation and Amortization
5
Internal Revenue Service. One, Big, Beautiful Bill Provisions
6
Internal Revenue Service. Revenue Procedure 2025-32, Inflation Adjustments for 2026
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
eCFR. 26 CFR 1.179-5 – Time and Manner of Making Election
11
Internal Revenue Service. Publication 544, Sales and Other Dispositions of Assets