Equipment or machinery bought for the business now qualifies for a 100% first-year write-off if it was acquired after January 19, 2025, under permanent guidance the IRS issued January 14, 2026. That is the bonus depreciation rate — no dollar cap, no phase-down schedule. A separate, capped break called the Section 179 deduction runs alongside it, and for 2026 that cap is $2,560,000, phasing out once qualifying purchases for the year exceed $4,090,000.
The two breaks get used together, but they are not the same tool, and the IRS guidance answers a question that has tripped up owners since the phase-down years: which one applies first, and does the purchase date actually matter.
The short version: it matters a lot. Property placed in service before January 19, 2025 falls under the old phase-down schedule, capped at 40% for most equipment. Property acquired after that date gets the full 100% allowance, permanently, under the law the IRS guidance implements — Notice 2026-11.
Does the 100% Rate Apply to a Given Purchase?
Check the acquisition date against January 19, 2025, first. The IRS guidance is explicit: eligible depreciable property acquired after that date, and specified plants planted or grafted after that date, qualify for the full 100% additional first-year deduction. Property acquired on or before it stays under the prior phase-down rules, which had bonus depreciation sliding toward 40% for most qualified property placed in service between the end of 2024 and the start of 2026, per IRS Publication 946. The guidance also lets a taxpayer elect a reduced 40% (or 60% for certain longer-production-period property and aircraft) instead of the full 100% for the first tax year ending after January 19, 2025 — an election, not a default. Sound recording productions were added as eligible property for costs incurred in a tax year ending after July 4, 2025.
The underlying law is the tax package Congress passed and the president signed on July 4, 2025, which restored bonus depreciation to 100% and made it permanent rather than a rate that steps down each year, according to NPR's coverage of the bill's signing. Before that law, bonus depreciation had been on a legislated glide path down from the 100% level businesses saw earlier in the decade.
How Much Can Be Expensed Under Section 179 in 2026?
Section 179 lets a business elect to expense the cost of qualifying equipment, up to $2,560,000 for property placed in service in 2026 — up from $2,500,000 in 2025 — per IRS Publication 946. That limit phases out dollar-for-dollar once a business puts more than $4,090,000 of qualifying property into service in the year, up from a $4,000,000 threshold in 2025. Heavy SUVs and certain other vehicles face a separate, lower cap: $32,000 for 2026, up from $31,300 in 2025. Unlike bonus depreciation, the Section 179 deduction cannot exceed the business's taxable income for the year — it can reduce that income to zero, but not create a loss.
Section 179 or Bonus Depreciation: Which Applies First?
The ordering is fixed, not a matter of preference. Section 179 is applied first, against the purchase price of qualifying property, up to the annual dollar limit and the taxable-income cap described above. Whatever cost remains after the Section 179 election — and any cost above the Section 179 cap — is then eligible for the 100% bonus depreciation allowance, which has no dollar limit and, unlike Section 179, can push the business into a net operating loss for the year. For a purchase larger than the Section 179 cap, or for a year where taxable income is already thin, bonus depreciation is doing most of the work.
What This Means for a Small Operation's Tax Bill
For an equipment-heavy small business — a contractor buying a truck fleet, a restaurant replacing a kitchen, a shop adding machinery — the practical effect is straightforward: a large capital purchase acquired after January 19, 2025 can be written off in full in the year it goes into service, rather than depreciated over five or seven years on a fixed schedule. That changes the year-one cash tax bill, not the total lifetime deduction — accelerated depreciation moves the same total write-off earlier, it does not create a bigger one. An owner weighing whether to buy equipment in December versus January should confirm the placed-in-service date and check current-year figures against IRS Publication 946 before filing, since the dollar limits adjust for inflation each year. This is informational reporting on published tax rules, not tax or legal advice; a purchase's actual tax treatment depends on the business's full return and should be confirmed with a tax preparer.
What Records Does an Operator Need to Claim Either Deduction?
Both elections are made on Form 4562, filed with the business's tax return for the year the property is placed in service — not necessarily the year it was ordered or paid for. "Placed in service" means the equipment is ready and available for its intended use in the business, which can be a later date than the invoice date on a large order with a lead time. That distinction is where the January 19, 2025 cutoff gets tested in practice: a machine ordered in 2024 but not installed and usable until 2025 is generally treated by its placed-in-service date, per the mechanics IRS Publication 946 lays out for depreciation timing generally. Keep the purchase invoice, the delivery or installation date, and documentation of business-use percentage, since Section 179 and bonus depreciation both require the property be used more than 50% for business to qualify, and a later drop below that threshold can trigger a recapture of part of the deduction in a subsequent year.
None of this changes what the equipment costs or what it is worth to the business — it changes when the tax benefit of owning it shows up. For an operator financing the purchase, that timing can matter as much as the rate on the loan itself.
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