How to Depreciate Computer Equipment: Section 179, Bonus, and MACRS

A business computer placed in service in 2026 can usually be written off in full the year you buy it. You have two routes to that full first-year deduction — Section 179 expensing (capped at $2,560,000 for 2026) and 100% bonus depreciation, which the One Big Beautiful Bill Act permanently restored when it was signed on July 4, 2025.¹ If spreading the deduction across future tax years works better for your situation, you can instead depreciate computer equipment over five years under the Modified Accelerated Cost Recovery System (MACRS).² Which one saves you the most depends on your income now versus later and how much equipment you bought this year.

Does Your Computer Qualify

Three conditions have to be met. You must own the computer, use it in a trade or business or income-producing activity, and expect it to last more than a year.³ Leased equipment does not qualify because you do not hold ownership; the lease payments themselves may be deductible as a business expense, but that is a separate track.

Mixed use is common and manageable. If you use a $2,000 laptop 70% for work and 30% for personal streaming and email, only $1,400 is depreciable. Keep a reasonable record of the split. Computers stopped being “listed property” under the Tax Cuts and Jobs Act, so you no longer need the strict contemporaneous logs that vehicles require, and you do not report them in Part V of Form 4562.⁴ A monthly estimate you can defend in an audit is enough.

When You Can Skip Depreciation Entirely

If the machine is inexpensive, the de minimis safe harbor lets you deduct the whole cost as a current expense and avoid depreciation altogether. The per-item ceiling is $2,500 without audited financial statements, or $5,000 with them.⁵ A $1,200 laptop clears the threshold easily. You make the election by attaching a statement to your return for that year. No asset tracking across future returns, no recapture worries.

Figure Your Cost Basis and Placed-in-Service Date

Your basis is not just the sticker price. It includes sales tax, shipping, and any setup or installation fees needed to get the computer ready for use.⁶ A $3,000 workstation with $200 sales tax and $150 in delivery and configuration has a basis of $3,350. For a mixed-use machine, apply the business-use percentage to that total before running any depreciation calculation.

The placed-in-service date is when the computer is ready and available for business use, not when you first actually use it.³ A boxed laptop in a closet is not in service. Unbox it, set it up, load your business software, and it is in service — even if the first real project waits another week. That date decides which tax year the depreciation starts.

Section 179 Expensing

Section 179 lets you deduct the full cost of qualifying equipment the year you place it in service. For tax years beginning in 2026, the cap is $2,560,000, and the deduction phases out dollar for dollar once your total qualifying purchases pass $4,090,000.⁷ For a small business buying a few computers, those numbers are not in play.

Two conditions do matter. Business use must exceed 50%, and it must stay above 50% for the entire five-year recovery period. If it drops to 50% or below in any of those years, you owe recapture tax on part of what you already deducted.³ The Section 179 deduction also cannot exceed your taxable income from the active conduct of a trade or business. Unused amounts carry forward.

Bonus Depreciation

The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025.¹ A computer bought and placed in service during 2026 is eligible for a full first-year write-off through this route.

Bonus depreciation works differently from Section 179 in ways that occasionally matter. There is no dollar ceiling and no taxable-income limitation, so bonus depreciation can create or deepen a net operating loss where Section 179 cannot. It applies automatically unless you elect out of it, which you might do if you would rather save deductions for a higher-income future year. Section 179 needs an affirmative election but caps at your business income.

Which Full-Expensing Route to Use

For a single computer, the two routes give you the same deduction. Bonus depreciation is the more flexible choice when you are buying a large volume of equipment or when you want the deduction to create a loss you can carry. Section 179 gives you more control asset by asset, since you can pick and choose which items to expense and which to depreciate normally.

MACRS Depreciation Over Five Years

If full expensing does not suit you — say, your income this year is low and you want to save deductions for later — MACRS is the default. Computers and peripherals are 5-year property under IRC Section 168. You recover the cost over six calendar years using the 200% declining-balance method and the half-year convention.²

The IRS publishes percentage tables that handle the math. For 5-year property under the half-year convention, the annual percentages are:³

Year 1: 20.00%
Year 2: 32.00%
Year 3: 19.20%
Year 4: 11.52%
Year 5: 11.52%
Year 6: 5.76%

On a $4,000 computer, that is $800 the first year, $1,280 the second, and progressively smaller amounts through a partial sixth year. Six years for a five-year asset looks odd until you remember the half-year convention: everything placed in service during the year is treated as placed in service at the midpoint, so year one is only a half-year of depreciation, and the other half falls in year six.

The Mid-Quarter Convention Trap

Watch the end of the year. If more than 40% of all your depreciable personal property for the year was placed in service during the final three months, the half-year convention is replaced by the mid-quarter convention.³ Each asset is then treated as placed in service at the midpoint of its actual quarter. Buy your only depreciable asset in November, and you get 1.5 months of first-year depreciation instead of six. Spreading purchases across the year avoids the problem; so does using Section 179 or bonus depreciation, both of which sidestep the convention entirely.

A Note on Software

Off-the-shelf software bought separately from the computer is depreciated straight-line over 36 months if it is commercially available to the public under a nonexclusive license and has not been substantially modified.³ A $900 license placed in service in April gives you $225 that first year ($900 ÷ 36 × 9), $300 each full year, and $75 in the final partial year. Qualifying software can also be expensed under Section 179 or bonus depreciation, which is usually the better move. Monthly software subscriptions where you never own the license are just current business expenses.

Filing the Deduction

Depreciation goes on Form 4562 (Depreciation and Amortization).⁸ Section 179 elections go in Part I, bonus depreciation in Part II, and regular MACRS depreciation in Part III.⁹ For each asset, you enter the date placed in service, cost basis, method, and recovery period.

Form 4562 attaches to your primary return. Sole proprietors file it with Schedule C of Form 1040. C corporations attach it to Form 1120.¹⁰ Partnerships and S corporations use Form 1065 or 1120-S and pass the depreciation through to owners on Schedule K-1. You only need Form 4562 for the year you first place an asset in service or claim a Section 179 deduction; in later years, the ongoing depreciation carries forward on the appropriate line of your return.

Watch for Recapture Later

The full-expensing routes carry a string. If you claimed Section 179 or bonus depreciation and business use later falls to 50% or below during the five-year recovery period, you owe recapture tax. The recapture amount is the difference between what you actually deducted and what you would have deducted using straight-line under the Alternative Depreciation System over the same five years.³ That difference is ordinary income on the return for the year business use dropped, and you switch to straight-line for whatever recovery period remains.

Selling or disposing of the computer triggers a similar rule. Under Section 1245, gain on the sale of depreciable personal property is treated as ordinary income up to the total depreciation you claimed. If you expensed a $3,000 computer under Section 179 and later sold it for $800, that $800 is ordinary income. You report the gain on Form 4797.

Records to Keep

Save the purchase invoice, receipts for setup costs, a note of the placed-in-service date, and a record of the deductions you took each year.¹¹ For mixed-use machines, a defensible business-use log is enough — you do not need the hour-by-hour records vehicles require.

The IRS floor is three years after filing the return with the deduction.¹² Practically, hold everything through the full recovery period plus three years, because you may need those figures again to calculate gain or recapture when you finally sell or retire the equipment.

1
Internal Revenue Service. One, Big, Beautiful Bill Provisions
2
Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System
3
Internal Revenue Service. Publication 946 (2024), How To Depreciate Property
4
Internal Revenue Service. Tax Cuts and Jobs Act – A Comparison for Businesses
5
Internal Revenue Service. Tangible Property Final Regulations – Frequently Asked Questions
6
Internal Revenue Service. Publication 551 (12/2025), Basis of Assets
7
Internal Revenue Service. 2025 Instructions for Form 4562 (Draft)
8
Internal Revenue Service. About Form 4562, Depreciation and Amortization
9
Internal Revenue Service. Form 4562 – Depreciation and Amortization (2025)
10
Internal Revenue Service. Instructions for Form 1120 (2025)
11
Internal Revenue Service. What Kind of Records Should I Keep
12
Internal Revenue Service. How Long Should I Keep Records