Section 179 & bonus depreciation: buying assets the smart way
The short answer
When you buy equipment, vehicles, or software for the business, you usually don't have to depreciate it over years — Section 179 and bonus depreciation let you deduct most or all of the cost in the year you place it in service. Under current law, bonus depreciation allows 100% first-year expensing for most qualifying property. The strategy is in the timing, the vehicle rules, and knowing that your state may not follow the federal deduction.
Who this works for — and who it doesn't
Good fit
- Owners who genuinely need equipment, vehicles, or build-outs and can time the purchase
- High-income years where a large deduction is worth the most
- Real estate investors pairing this with cost segregation
Not a fit
- Buying things you don't need "for the write-off" — spending $1 to save 40 cents
- Vehicles that are mostly personal — business-use percentage governs everything
- Assuming the state deduction matches the federal one (in California, it usually doesn't)
How it works
- Buy and place in service by December 31. "Placed in service" — usable, not just ordered — is the date that counts.
- Elect Section 179 asset-by-asset up to the annual cap, and/or apply bonus depreciation by class.
- For vehicles, weight matters: over 6,000 lbs GVWR escapes the passenger-auto caps; keep a mileage log proving business use above 50%.
- Run the state calculation separately — nonconforming states add the deduction back and depreciate on their own schedule.
- Financing is fine: deduct the full cost now even with payments over five years.
A worked example
Dev's production company has a strong year and genuinely needs gear and a transport vehicle before December.
Dev's year-end purchases, placed in service in December
Illustrative only — the California deduction on the same purchases would be far smaller in year one, which is exactly why the buy/lease/timing decision should be run both ways first.
Common mistakes that draw IRS attention
- No mileage log on a heavy SUV claimed at 100% business use
- Deducting assets "ordered" in December but not in service until February
- Listed property that's really the family car
- Ignoring depreciation recapture when the asset is later sold or converted to personal use
Frequently asked questions
What's the difference between Section 179 and bonus depreciation?
Both let you deduct asset costs immediately instead of over years. Section 179 has an annual dollar cap, requires taxable income, and lets you pick assets item by item. Bonus depreciation applies by asset class, can create a loss, and currently allows 100% expensing for most qualifying property. They're often used together.
Does financing the purchase change the deduction?
No — you can generally deduct the full qualifying cost in year one even if you financed it. That combination (full deduction now, payments over time) is powerful, and also the easiest way to buy something you didn't need.
Do heavy SUVs and trucks really get special treatment?
Vehicles over 6,000 lbs gross vehicle weight rating escape the passenger-auto depreciation caps. SUVs in that class face their own Section 179 ceiling, with bonus depreciation often covering much of the rest — but business-use percentage and mileage logs are what make or break it.
Will my state allow the same deduction?
Often not — many states, including California, don't conform to federal bonus depreciation and cap Section 179 far lower. Your federal and state deductions can differ dramatically, which belongs in the buying decision.
Planning a big purchase before year-end?
We'll run the federal and state math, the buy-vs-lease comparison, and the timing — before you sign, when the numbers can still change the decision.
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