Bonus Depreciation vs. Section 179
FAQs for Equipment Write-Offs
If you’re investing in equipment, vehicles, software or farm assets, depreciation strategy is a high-impact lever for cash flow and tax outcomes. The right play isn’t always “take the biggest deduction.” It’s aligning deductions with taxable income, financing terms, future profitability and what you want your returns to look like over the next few years.
Bonus Depreciation Frequently Asked Questions
Bonus depreciation is an additional first-year deduction that allows you to write off a significant portion of qualifying asset costs in the year they’re placed in service. Under the One Big Beautiful Bill (OBBB), 100% bonus depreciation is available again for qualifying assets acquired after Jan. 19, 2025.
Section 179 is an election that lets you expense qualifying asset purchases up to an annual cap, subject to taxable income limitations. Unlike bonus depreciation, Section 179 generally cannot create a loss from business income.
Think of it as flexibility vs. scale:
• Bonus depreciation can generate a loss and is often the “big accelerator” for deductions.
• Section 179 is more surgical (often applied asset-by-asset) but is constrained by taxable income and annual limits.
Common qualifiers include:• Modified Accelerated Cost Recovery System (MACRS) property with a recovery period of 20 years or less
• Depreciable computer software
• Water utility property
• Certain improvement property categories
• Vehicles with a useful life of 20 years or less
• Used equipment (if placed in service in the current year)
Examples called out in this Adams Brown blog post include farm machinery, breeding livestock and grain bins (with limitations). Section 179 is not allowed for multi-purpose farm buildings.
Not typically. For example, a 20-year farm building (like a machine shed) wouldn’t be eligible for Section 179, but may be eligible for bonus depreciation.
Bonus depreciation is claimed on Form 4562 by the due date (including extensions) for the year the property is placed in service. If you don’t want bonus depreciation, you must opt out.
Yes. Bonus depreciation can be subject to recapture up to the amount taken, taxed as ordinary income, with a cap of 25%.
Section 179 is often a strong fit when you want more control over taxable income across years/entities and you don’t want to over-accelerate deductions.
For the 2025 tax year, Section 179 allows you to expense up to $2,500,000 of qualifying equipment purchases. The deduction phases out dollar-for-dollar once total qualifying purchases exceed $4,000,000 and once you’re over that threshold, the available deduction shrinks quickly. These limits are indexed for inflation, so they’re designed to move over time rather than stay static.
For current-year thresholds and state conformity, confirm with your tax advisor before executing purchases.
Want a depreciation strategy that optimizes cash flow without boxing you into next year’s tax position? Adams Brown can model multiple scenarios and align purchases, financing and deductions with your broader plan.