Section 179 is an election; bonus depreciation applies unless you elect out.
Section 179 is an election, made asset by asset on Form 4562, to expense the cost of qualifying tangible personal property and certain improvements to nonresidential buildings. It is capped by an annual dollar limit, reduced dollar for dollar once total qualifying purchases in the year exceed a phase-out threshold, and limited to the taxpayer's business income for the year. Disallowed amounts carry forward.
Bonus depreciation under Section 168(k) applies automatically to qualifying property unless the taxpayer elects out, class by class, for the year. There is no dollar cap and no business-income limit; it can create or increase a loss.
The 2025 act restored 100% bonus depreciation and raised the Section 179 limits.
The One Big Beautiful Bill Act, signed on 4 July 2025, restored 100% bonus depreciation for qualifying property acquired after 19 January 2025 and made the rate permanent. Property acquired on or before that date stays on the phase-down schedule it was acquired under: 60% for property placed in service in 2024 and 40% for 2025. The same act raised the Section 179 dollar limit to $2,500,000 and the phase-out threshold to $4,000,000 for property placed in service in tax years beginning after 31 December 2024, both indexed for inflation in later years.
The acquisition date, not the placed-in-service date, decides which bonus rate applies. For property built under a binding contract, the acquisition date is the contract date. This is the single fact most often recorded wrongly in a register, and the one to check first.
Section 179 applies first, then bonus, then the MACRS table.
Section 179 is applied first, to the assets the taxpayer elects, and reduces basis. Bonus depreciation then applies to the remaining basis of qualifying property in classes not elected out. Regular MACRS depreciation applies to what is left, at the rates in the table below. Because Section 179 is limited by business income and bonus is not, a taxpayer near the income limit usually elects Section 179 on the property that would not qualify for bonus (used property in some states, certain building improvements) and lets bonus take the rest.
| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
|---|---|---|---|---|---|---|
| 1 | 33.33 | 20.00 | 14.29 | 10.00 | 5.00 | 3.750 |
| 2 | 44.45 | 32.00 | 24.49 | 18.00 | 9.50 | 7.219 |
| 3 | 14.81 | 19.20 | 17.49 | 14.40 | 8.55 | 6.677 |
| 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.70 | 6.177 |
| 5 | 11.52 | 8.93 | 9.22 | 6.93 | 5.713 | |
| 6 | 5.76 | 8.92 | 7.37 | 6.23 | 5.285 | |
| 7 | 8.93 | 6.55 | 5.90 | 4.888 | ||
| 8 | 4.46 | 6.55 | 5.90 | 4.522 | ||
| 9 | 6.56 | 5.91 | 4.462 | |||
| 10 | 6.55 | 5.90 | 4.461 | |||
| 11 | 3.28 | 5.91 | 4.462 | |||
| 12 | 5.90 | 4.461 | ||||
| 13 | 5.91 | 4.462 | ||||
| 14 | 5.90 | 4.461 | ||||
| 15 | 5.91 | 4.462 | ||||
| 16 | 2.95 | 4.461 | ||||
| 17 | 4.462 | |||||
| 18 | 4.461 | |||||
| 19 | 4.462 | |||||
| 20 | 4.461 | |||||
| 21 | 2.231 |
The state book is separate because many states do not conform.
Many states do not conform to federal bonus depreciation at all, and several set their own Section 179 limits. A register that keeps one tax book has to carry the state difference as an off-book adjustment every year until the asset is fully depreciated in both. A register with a state book records the state treatment once and reports the addback and the subsequent recovery by year. The depreciation engine page describes how the state book is set per state.
A worked example shows the difference lands in the state book.
| Line | Section 179 first | Bonus only |
|---|---|---|
| Section 179 elected | 400,000.00 | 0.00 |
| Bonus depreciation at 100% on remaining basis | 200,000.00 | 600,000.00 |
| First-year deduction, federal | 600,000.00 | 600,000.00 |
| Section 179 carryforward (income-limited) | 0.00 | 0.00 |
| State addback in a non-conforming state that allows $25,000 of Section 179 and no bonus | 575,000.00 | 600,000.00 |
In this example the federal result is the same either way, and the difference is entirely in the state book: the Section 179 election preserves a small state deduction that bonus alone would not. The register should show both books on the asset, and the projection should show the state recovering the addback over the remaining life.
Four things to record on the asset.
- Acquisition date and placed-in-service date, separately.
- Section 179 amount elected, per book, and the carryforward if any.
- Bonus rate applied, and whether an elect-out was made for the class and year.
- State treatment for each state book, including the state's own Section 179 limit.
Sources: Internal Revenue Code sections 168(k) and 179 as amended by Public Law 119-21 (2025); IRS Publication 946 (2025), Table A-1. Figures for later years are indexed and should be checked against the current revenue procedure before filing.