If you’re planning equipment purchases before year-end, you’re staring at a high-leverage decision: Section 179 vs bonus depreciation. Both can deliver big first-year depreciation deductions, but the rules changed in 2025—and the “best” choice depends on your cash flow, taxable income, and when you acquired and placed the asset in service. This guide breaks it down in plain English so you can turn equipment purchase tax savings into a growth plan—not just a tax move.
Bonus depreciation was scheduled to phase down to 40% for assets placed in service in 2025. New legislation commonly nicknamed the “One Big Beautiful Bill Act” restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, with transition rules for assets around that date. That means many businesses can again deduct the full cost in year one—if they meet the acquisition and placed-in-service tests.
For 2025, 179’s maximum deduction is $1,250,000, reduced dollar-for-dollar once total qualifying purchases exceed $3,130,000. Heavy SUVs carry a special cap of $31,300. Section 179 also has a business income limitation—you can’t deduct more than your active trade or business income, though unused amounts can carry forward.
Both provisions generally apply to tangible personal property used in business (equipment, machinery, computers, certain software) and qualified improvement property. Section 179 also covers specific building improvements like roofs, HVAC, fire protection, and security systems for nonresidential real property. As always, placed-in-service means the asset is ready and available for its assigned function—not just purchased.
Think of Section 179 as flexible but capped, and bonus depreciation as powerful and broad:
Yes. Under the new law, property must be acquired after Jan. 19, 2025, to qualify for 100% bonus depreciation. Assets acquired before that date generally follow the prior phased-down percentages unless a specific transition election applies. Documentation of purchase date and any binding written contract is critical.
Several states don’t fully conform to federal bonus depreciation or Section 179. If you operate in multiple states, differences in conformity can swing your after-tax ROI. Build your model on federal plus state scenarios before finalizing orders.
An accountant records what happened. An advisor helps you decide what should happen next. At B.A.A.P., we don’t just plug numbers into Form 4562—we map asset timing, vendor terms, and cash-on-cash returns to your 12- to 36-month plan. Any CPA firm can record history. Our firm will help you build a future.
Illustrative client example (fictional):
Suncoast Derm, a multi-location practice, planned $1.8M of equipment upgrades. In June 2025, they ordered a $900K laser system (binding contract dated Jan. 10) and $600K of imaging devices in August (binding contract dated Aug. 25). Installation for both landed in November. They also considered a $300K IT refresh in early December.
Use a decision stack:
Action steps before you sign or install
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It’s when the property is ready and available for its specific business use—not just when you bought it or it arrived on site. Keep installation and readiness documentation.
Yes. Many businesses 179-expense part of the cost (e.g., up to caps) and then apply bonus to the remainder to maximize first-year depreciation while managing taxable income.
Maximum $1,250,000, phasing out after $3,130,000 of qualifying purchases; heavy SUVs are capped at $31,300. The deduction is also limited to your active business income, with carryforward allowed.
Yes—for qualifying property acquired after Jan. 19, 2025, subject to transition rules and the same general §168(k) eligibility tests.
Not always. Some decouple from bonus depreciation or limit Section 179. Model both federal and state before finalizing purchases.
