Part of the Deductions guide.
The main guide mentions Section 179 and bonus depreciation briefly under the OBBBA changes. This is the full comparison: what each actually does, the order the IRS requires you to apply them, and a vehicle-specific breakdown that matters if you’re considering a business vehicle purchase.
What Both Deductions Actually Do
Both let you deduct the full cost of qualifying equipment, vehicles, or software in the year you place it in service — instead of depreciating it over several years the traditional way. That’s where the similarity ends.
Section 179 — For 2026, you can expense up to $2,560,000 in qualifying purchases, with the deduction phasing out dollar-for-dollar once total purchases exceed $4,090,000, reaching zero at $6,650,000. You choose which specific assets to expense and how much — real flexibility, useful if you want to target a specific taxable income level.
Bonus depreciation — Set at 100% and made permanent under the One Big Beautiful Bill Act for property placed in service after January 19, 2025. No dollar cap. Applies automatically to an entire asset class unless you specifically opt out — less flexible, more all-or-nothing.
The Difference That Actually Matters: Income Limits
Section 179 can’t create a business loss. It’s capped at your taxable business income for the year — if your deduction would push you into negative income, the excess doesn’t disappear, but it carries forward rather than counting this year.
Bonus depreciation has no such limit. It can create or increase a net operating loss, which itself carries forward to offset future income. This is the real strategic distinction: Section 179 suits a profitable year where you want targeted control; bonus depreciation suits a year where maximizing the current deduction — even into a loss — makes sense.
The Order Is Not Optional
The IRS requires a specific sequence: Section 179 first, then bonus depreciation on whatever basis remains, then standard depreciation on anything left after that. You don’t get to apply them in whichever order produces a better result — the calculation runs in that order every time. Both are claimed on Form 4562.
In practice, this means many freelancers end up using both together on the same purchase: Section 179 covers what fits within the income limitation, and bonus depreciation picks up the remainder with no cap.
Vehicles Get Their Own Rules — and This Is Where the Real Money Is
If you’re weighing a vehicle purchase for the business, the vehicle’s weight class changes the math dramatically. One rule applies across all three tiers below, and it’s non-negotiable: business use has to exceed 50% for any of these accelerated deductions to be available at all. Drop to 50% or below, and Section 179 and bonus depreciation are both off the table — you’re limited to slower, standard depreciation instead.
Light passenger vehicles (under 6,000 lbs GVWR — most cars): these are subject to the IRC §280F “luxury auto” limits, which cap the total first-year write-off, not just the Section 179 portion. The base cap runs around $12,300. Layer on the OBBBA’s permanent 100% bonus depreciation, which adds a further $8,000 specifically for passenger vehicles under these rules, and the realistic total first-year deduction tops out around $20,300 — meaningfully higher than the base cap alone, but still a hard ceiling regardless of the car’s actual price.
Heavy SUVs and trucks (6,001–14,000 lbs GVWR): Section 179 covers up to $32,000 of the purchase. Here’s the part worth spelling out directly: because bonus depreciation is now a permanent 100% under OBBBA, the entire remaining balance above that $32,000 can be deducted the same year, with no further cap. Buy an $80,000 heavy SUV for the business, and the math runs $32,000 (Section 179) + $48,000 (100% bonus depreciation on the remainder) = the full $80,000 deducted in year one.
Qualified commercial vehicles (over 14,000 lbs, used entirely for business): exempt from the passenger-vehicle limits entirely. Fully eligible for the maximum Section 179 limit — up to the full $2,560,000 cap covered above.
That gap between a passenger car and a heavier work vehicle isn’t a rounding difference — it’s the difference between a roughly $20,000 ceiling and the potential to deduct the entire purchase price in year one. If a vehicle purchase is genuinely on the table for the business, the GVWR (gross vehicle weight rating) is worth checking before you buy, not after.
A Worked Example
You buy $50,000 of qualifying equipment and your business has $80,000 in taxable income before the deduction.
Section 179 alone: you can expense up to the full $50,000, since it’s well under both the $2,560,000 cap and your $80,000 income limit. Full deduction, no bonus depreciation needed.
If instead you bought $100,000 of equipment in a year your business only cleared $40,000 in income: Section 179 is capped at your $40,000 taxable income for the year (the rest carries forward). Bonus depreciation, with no income cap, can pick up the remaining $60,000 in the same year — potentially creating a loss that carries forward to offset future income.
What This Doesn’t Cover
Both deductions come with a real future consideration: depreciation taken now generally gets “recaptured” — taxed — if you sell the asset later for more than its depreciated value. This isn’t a reason to avoid the deduction, but it’s a real trade-off worth understanding before making a large purchase primarily for the tax benefit rather than genuine business need.
Sources: IRC §179 (expensing election); IRC §168(k) (bonus depreciation); One Big Beautiful Bill Act provisions making 100% bonus depreciation permanent; IRS Form 4562 instructions; 2026 Section 179 inflation-adjusted limits.
This article is educational content, not individualized tax or legal advice. Consult a qualified professional about your specific situation.