How to Write Off Small Business Equipment: Section 179, Bonus, MACRS

You can write off small business equipment by deducting most of its cost in the year you put it to work, either through the Section 179 election or 100% bonus depreciation, with a separate shortcut for low-cost items and a slower schedule (MACRS) for anything left over. For tax years beginning in 2026, the Section 179 cap alone is $2,560,000.¹ Which method fits depends on how much you spent, how much taxable income your business earned, and whether you want the deduction now or spread across future years.

What Equipment Qualifies

Property is depreciable when you own it, use it in your business or to produce income, can determine its useful life, and expect it to last more than a year.² That sweeps in machinery, office furniture, delivery vans, computers, printers, diagnostic tools, and phones. Even a tablet counts, as long as it does business work.

Business use has to clear 50% for you to reach the strongest write-offs. Section 179 and bonus depreciation both require more-than-50% business use.³ Fall to 50% or below and you can still depreciate the item, but only under the slower Alternative Depreciation System.

Listed Property Gets Extra Scrutiny

Certain dual-use items, called listed property, come with tighter recordkeeping because they invite personal use. The category covers passenger vehicles at or below 6,000 pounds, other transportation property like motorcycles and aircraft, and entertainment or recreational gear such as cameras and audio equipment.⁴ For those items, keep the expense amount, the date and place of use, the business purpose, and the business relationship of anyone involved. Equipment that stays at your regular business location, like a desktop that never leaves the office, is generally outside the listed property rules.

Section 179: Deduct It All This Year

Section 179 lets you expense the full cost of qualifying equipment in the year you place it in service instead of depreciating it over time. For 2026, the maximum election is $2,560,000. The cap phases out dollar-for-dollar once total equipment purchases pass $4,090,000 and disappears entirely at $6,650,000.¹ New and used equipment both qualify as long as you acquired it for business use.⁵

The Income Cap That Trips People Up

Section 179 cannot exceed your total taxable income from the active conduct of all your trades or businesses that year.⁵ Spend $100,000 on equipment when your business earns $60,000 in taxable income, and Section 179 stops at $60,000 for the year. The unused $40,000 carries forward to a future year with enough income.⁶ When the income limit gets in the way, bonus depreciation usually picks up the slack, because it has no income cap.

100% Bonus Depreciation

The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025, so in 2026 you can deduct the entire cost of eligible equipment the first year.⁷ Bonus depreciation has no dollar ceiling on total purchases and no income limit. It can push your business into a net operating loss, which Section 179 cannot.

Bonus depreciation applies to property with a MACRS recovery period of 20 years or less, which covers most business equipment.⁸ Used property qualifies if it is new to you and you did not buy it from a related party or through certain tax-free transactions. You can elect out for any class of property, which sometimes makes sense if you expect a higher tax bracket in later years.

The Shortcut for Items Under $2,500

For smaller purchases, the de minimis safe harbor lets you skip depreciation entirely and deduct items costing $2,500 or less per invoice or per item.⁹ That threshold covers most small businesses, which do not have an applicable financial statement; businesses with audited financials get a $5,000 threshold. You elect this each year by attaching a statement to your return. It is the right tool for hand tools, small electronics, and inexpensive office furniture, where a depreciation schedule is more work than the deduction is worth.

What Happens to Anything Left Over: MACRS

When equipment is not fully expensed through Section 179, bonus depreciation, or the de minimis safe harbor, the remainder gets recovered through the Modified Accelerated Cost Recovery System. MACRS assigns each type of equipment a recovery period based on expected useful life.² Common categories:

5-year property: computers, office machinery like copiers and calculators, automobiles, and light trucks.
7-year property: office furniture and fixtures such as desks, filing cabinets, and safes, plus most general-purpose equipment not placed in another class.
15-year property: qualified improvement property (interior improvements to nonresidential buildings).

MACRS front-loads the deductions, so early years are larger than later ones. Publication 946 provides percentage tables that tell you exactly how much to deduct each year given the asset class, method, and first-year convention.²

Business Vehicles Have Their Own Caps

Vehicles use the same write-off methods as other equipment, but passenger automobiles run into the Section 280F annual caps. For passenger vehicles placed in service in 2025, the first-year limit is $20,200 with bonus depreciation and $12,200 without it.¹⁰ The IRS usually publishes updated 2026 figures later in the year, adjusted slightly for inflation.

Heavy Vehicles Escape the Passenger Auto Caps

Vehicles with a gross vehicle weight rating over 6,000 pounds are not subject to the passenger auto caps. A qualifying heavy truck or van used 100% for business can be fully expensed under Section 179 or bonus depreciation in the year of purchase. Heavy SUVs designed primarily to carry passengers, between 6,001 and 14,000 pounds, still qualify for Section 179 but are capped at $32,000 for 2026.¹ Anything above that SUV cap can still come through bonus depreciation or MACRS. Heavy pickup trucks and cargo vans that are not designed primarily for passengers face no cap and can be fully deducted.

How to Claim the Deduction

Equipment write-offs go on Form 4562 (Depreciation and Amortization), attached to your income tax return.¹¹ The form separates deduction methods:

Part I is for Section 179 elections: describe the property, its cost, and the amount you expense.³
Part II is for bonus depreciation on qualifying assets.
Part III is for MACRS: date placed in service, business-use basis, recovery period, and depreciation method.
Part V is for listed property, including business use percentage and vehicle substantiation.

The totals move to different places based on your entity. Sole proprietors carry the depreciation total to Schedule C. Corporations report it on Form 1120.⁴ Partnerships and S corporations file Form 1065 or Form 1120-S, and the deductions pass through to partners or shareholders on Schedule K-1. Mismatches between Form 4562 and the corresponding line on your main return commonly trigger IRS notices, so reconcile them before filing.

Records You Need to Keep

Every write-off starts with documentation. At a minimum, keep:

The date the equipment was placed in service (ready and available for use, not necessarily the purchase or delivery date).
The total cost basis, which includes the purchase price plus sales tax, shipping, and installation.¹²
A business-use log, especially for vehicles and other listed property.
The deduction method you chose: Section 179, bonus depreciation, or MACRS.

The usual three-year retention rule is not long enough for equipment. Hold onto purchase receipts, depreciation schedules, and usage logs for as long as you own the item plus at least three years after you dispose of it.¹³ If you acquired the item through a trade-in or tax-free exchange, keep records on both the old and new property until the limitations period runs on the year you dispose of the replacement.

Recapture: The Bill Comes Due When You Sell

Writing off equipment reduces tax now, but the IRS reclaims part of that benefit when you sell for a gain. Under Section 1245, gain on the sale of depreciable personal property is taxed as ordinary income (not capital gains) up to the amount of depreciation you already deducted.¹⁴ Buy a $50,000 machine, expense it in full under Section 179, sell it later for $20,000, and the whole $20,000 is ordinary income because it falls within your prior write-off.

Recapture Without a Sale

You can trigger recapture without selling anything. If business use of Section 179 property drops to 50% or less during the recovery period, you have to add the excess deduction back to income for that year.² The recapture is the Section 179 amount minus the depreciation that would have been allowed under MACRS from the beginning. Listed property depreciated with an accelerated method faces the same rule against the straight-line baseline.

Fixing Missed Depreciation From Prior Years

If you find out you failed to claim depreciation in earlier years, an amended return generally is not the fix. You file Form 3115 (Application for Change in Accounting Method) with your current-year return to move from an incorrect method to the correct one.¹⁵ The IRS treats missed depreciation as an impermissible accounting method. Under the automatic change procedures, you calculate a Section 481(a) adjustment that gathers all the depreciation you should have claimed and applies it as a single catch-up deduction on the current return. No user fee applies for automatic changes; attach the original form to your timely filed return and send a copy to the IRS National Office.

State Taxes Do Not Automatically Follow

Federal write-offs do not carry to your state return by default. States differ on whether they adopt the federal Section 179 limits, allow bonus depreciation, or set their own caps. Some conform fully, some conform partially with lower dollar limits, and a few disallow bonus depreciation altogether. Check your state’s current conformity rules before assuming a federal deduction produces the same result at the state level.

1
Internal Revenue Service. Revenue Procedure 2025-32 – 2026 Adjusted Items
2
Internal Revenue Service. Publication 946 (2024), How To Depreciate Property
3
Internal Revenue Service. Instructions for Form 4562 (2025)
4
Internal Revenue Service. 2025 Instructions for Form 4562 – Depreciation and Amortization
5
Office of the Law Revision Counsel. 26 USC 179 – Election To Expense Certain Depreciable Business Assets
6
eCFR. 26 CFR 1.179-2 – Limitations on Amount Subject to Section 179
7
Internal Revenue Service. One Big Beautiful Bill Provisions
8
Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System
9
Internal Revenue Service. Tangible Property Final Regulations
10
Internal Revenue Service. Revenue Procedure 2025-16 – Limitations on Depreciation Deductions for Passenger Automobiles
11
Internal Revenue Service. About Form 4562, Depreciation and Amortization
12
Internal Revenue Service. Publication 551 (12/2025), Basis of Assets
13
Internal Revenue Service. How Long Should I Keep Records
14
Office of the Law Revision Counsel. 26 USC 1245 – Gain From Dispositions of Certain Depreciable Property
15
Internal Revenue Service. Instructions for Form 3115 (Rev. December 2022)