Equipment & Bonus Depreciation

Equipment purchases represent one of the largest tax planning opportunities available to business owners through Section 179 expensing and bonus depreciation provisions.

Section 179 Expensing

Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year placed in service, rather than depreciating over several years. For 2024, the maximum deduction is $1,160,000, phasing out dollar-for-dollar when total equipment purchases exceed $2,890,000.

Qualifying property includes machinery, equipment, computers, furniture, and certain vehicles. Section 179 cannot create or increase a loss—it's limited to business taxable income.

Bonus Depreciation

Bonus depreciation provides additional first-year deductions beyond Section 179. The current bonus depreciation percentage determines what portion of remaining basis can be deducted immediately. Unlike Section 179, bonus depreciation can create or increase a net operating loss.

Strategic Coordination

Section 179 and bonus depreciation work together. Typically, apply Section 179 first (selecting which assets to expense), then apply bonus depreciation to remaining eligible property. This combination can result in 100% first-year deduction for most equipment.

Vehicle Considerations

Passenger vehicles have limited depreciation deductions due to luxury auto caps. However, vehicles over 6,000 pounds GVWR have higher limits or no limits depending on their weight class. Heavy SUVs, trucks, and vans often qualify for substantial first-year deductions.

Timing Decisions

Equipment must be placed in service (ready and available for use) by December 31st to qualify for current-year deductions. But if you expect higher income in future years, deferring purchases might be strategically better. Model both scenarios with your CPA.