100% Bonus Depreciation Is Permanent: 2026 Section 179 Cap $2,560,000

Two provisions moved at once. The full first year write off returned: the IRS depreciation guide credits P.L. 119-21, the One Big Beautiful Bill Act, with reinstating the 100% special depreciation allowance for qualified business property that is both acquired and placed in service after January 19, 2025, and it extends the same treatment to long production period property, certain aircraft, and specified plants bearing fruits and nuts.^[1] The same law also enlarged Section 179, lifting the ceiling from $1,000,000 to $2,500,000 for property placed in service in tax years that begin after December 31, 2024, with every dollar figure in that section now indexed for inflation for tax years beginning after 2025.^[3]

The date test has two halves and both matter: acquisition and placed in service must each fall after January 19, 2025 for the 100% allowance to apply.^[6] Property acquired before January 20, 2025 stays on the older step down schedule, so two nearly identical machines bought weeks apart can carry very different first year deductions. Sorting that out is tax planning work that belongs in the fall, not at filing time.

It is permanent. The IRS summary of the law describes "a permanent 100-percent additional first year depreciation deduction for qualified property acquired after January 19, 2025", with no reduction scheduled in the provision.^[2] That ends the annual guessing game the old phase down created, when the allowance dropped a step each year and equipment budgets had to be timed against the calendar rather than the business.

One reduced rate survives, and it is elective rather than automatic. A taxpayer may choose a 40% special depreciation allowance, or 60% for long production period property and certain aircraft, instead of the 100% allowance, and only in the first tax year ending after January 19, 2025.^[6] After that year the remaining choice is different in kind: an owner elects out of the allowance for an entire class of property, and that election generally cannot be revoked without IRS consent. Owners expecting materially higher income later, or filing in states that do not follow the federal allowance, are the ones who run the comparison.

Two limits catch owners off guard. Section 179 has a business use test: when property serves both business and personal purposes, the election is available only if business use is more than 50% in the year the property is placed in service, and only the business share of the cost is expensed.^[10] Property that must be depreciated under the Alternative Depreciation System cannot take the special allowance at all, and property placed in service and disposed of in the same tax year is excluded.

The two regimes also do not cover the same assets. Land and land improvements never qualify for Section 179, and buildings generally do not either, with one deliberate exception: an owner can elect to treat qualified real property as section 179 property, which pulls in qualified improvement property plus roofs, heating and air conditioning, fire protection and alarm systems, and security systems added to a nonresidential building.

The dollar ceiling is only the first gate. Once purchases cross the threshold the maximum falls dollar for dollar: a 2026 tax year with $4,090,000 of section 179 property starts eating into the $2,560,000 ceiling immediately, and a large fleet or plant expansion can wipe the election out entirely.^[5] The same mechanic runs off $2,500,000 and $4,000,000 for tax years beginning in 2025.^[4] Because the amounts are indexed annually for tax years beginning after 2025, the thresholds move and a plan built on last season's numbers will be wrong.^[3]

Income is the second gate, and it is the one that surprises people. In the depreciation guide, the total cost deductible after the dollar limit is "limited to the taxable income from the active conduct of any trade or business during the year", and any cost disallowed by that limit carries to the next year rather than disappearing. The special allowance is computed differently: the guide calls it "an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS", figured from depreciable basis rather than from taxable income. That is why a low income year tends to shift the deduction toward the allowance and away from Section 179.

Order matters because the two elections work in opposite directions. Section 179 is chosen asset by asset, so an owner picks exactly which items to expense and how much of each. The special allowance is the default for a whole class of property unless the owner elects out of that class. That asymmetry is the planning lever: a business that wants a smaller current deduction keeps assets out of Section 179 and elects out of the allowance for the class, while a business that wants the largest first year deduction runs Section 179 up to the ceiling and lets the allowance clear the rest. Running both paths across several years, against projected income and any state that does not conform, is advisory solutions work rather than a decision to make while a return is being keyed in.

It depends on the weight class, and the gap between classes is wide. A passenger automobile is "any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight", and for a passenger automobile the depreciation deduction, counting both the Section 179 election and the special allowance, is capped by an annual ceiling. A sedan used for client visits will not produce a full first year write off no matter which label the deduction carries.

Heavier vehicles sit outside that ceiling but run into a separate Section 179 rule. A taxpayer "cannot elect to expense more than $31,300 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service in tax years beginning in 2025", and the rule reaches four wheeled vehicles rated at more than 6,000 pounds and not more than 14,000 pounds gross vehicle weight.^[9] For tax years beginning in 2026 the ceiling is $32,000.^[5] The cap constrains Section 179 only: basis left after the capped election can still take the 100% allowance when the vehicle is qualified property.^[6]

Three carve outs escape that ceiling entirely: a vehicle designed to seat more than nine passengers behind the driver seat, one with a cargo area of at least six feet in interior length that is not readily accessible from the passenger compartment, and one with an integral enclosure fully enclosing the driver compartment and load carrying device that also carries no seating behind the driver seat. Cargo vans usually land in that last group. A crew cab pickup does have seating behind the driver, so it clears the ceiling only on the length of its bed, which is why the carve out has to be tested vehicle by vehicle rather than assumed. Business use still has to exceed 50%,^[10] and if it later drops to that level or below, excess depreciation is recaptured into income.

This is the newest of the three regimes and the least understood. The same law added section 168(n), an elective special depreciation allowance for qualified production property: property placed in service after July 4, 2025 whose construction began, or that was acquired, after January 19, 2025 is eligible for a 100% allowance.^[8] What makes it unusual is the asset type. It is nonresidential real property, the building itself, rather than the equipment inside it.

Both ends of the window are fixed, and that is the part short summaries leave out. Eligible property has to be constructed beginning after January 19, 2025 and before January 1, 2029, and placed in service in the United States or a United States territory after July 4, 2025 and before January 1, 2031.^[11] A project that breaks ground in 2029, or that is not in service before 2031, sits outside the provision no matter how well it fits the rest of the test, which makes the construction calendar itself a tax decision.

The building has to be used as an integral part of a qualified production activity, which the guide defines as "the manufacturing, production, or refining, of a product of tangible personal property, that results in a substantial transformation of the property comprising the product". Space used for offices, research activities, or storage of finished goods is ineligible, so a plant with a front office is designated by portion rather than as a whole. The election is made by attaching a statement to a timely filed return, it cannot be revoked except in extraordinary circumstances, and a change of use inside the recapture window pulls the entire allowance back into ordinary income even if the building is never sold.

Any business whose balance sheet is mostly equipment feels this first. A contractor financing an excavator, a restaurant group replacing a kitchen line, a practice buying imaging equipment, and a carrier cycling tractors all face the same arithmetic: the cost lands in the purchase year instead of spreading across a recovery period that can run to 20 years.^[7] On a financed asset the deduction can arrive years before the loan is repaid, which is a cash flow event as much as a tax one.

Two cautions travel with the benefit. The deduction reduces basis, so gain on a later sale is larger and is recaptured as ordinary income up to the allowance previously allowed, and selling a fully expensed truck two seasons later can produce a bill the owner did not plan for. State conformity is a separate question, so a business filing in more than one state needs each state calculation run on its own.

Contractors and restaurant groups see the largest swings here, and the fixed asset register is where the planning starts, whether the work is construction + contracting tax help or restaurant + food-service tax help. The research half of the same law is covered in the Section 174A R&D expensing guide, and the whole package is summarized in the One Big Beautiful Bill Act tax changes guide.

None of this reaches a return on its own. The allowance and the Section 179 election are both reported on the depreciation form, several of the choices exist only if a statement is attached to a timely filed return, and an election out is generally irrevocable without IRS consent. That paperwork is what gets missed when the purchase decision is made in December and the return is prepared in March, which is why the fixed asset records and the business tax return preparation engagement need to be looking at the same list.