Section 179 · Section 168(k)
Section 179 versus bonus depreciation
Both give you a full first-year deduction. They behave completely differently at the edges, and the edges are where the planning happens.
| Section 179 | Bonus depreciation §168(k) | |
|---|---|---|
| 2026 dollar cap | $2,560,000 | None |
| Phase-out threshold | Begins at $4,090,000 of additions, fully phased out at $6,650,000 | None |
| Taxable income limit | Limited to aggregate business taxable income; excess carries forward | None — can create or increase a loss |
| Election | Elective, asset by asset, and partially | Automatic unless you elect out, by class |
| Real property | Qualified improvement property plus roofs, HVAC, fire protection and security systems on nonresidential buildings | Any MACRS property with a 20-year or shorter life |
| Residential rental | Not available for the building or its structural components; available for certain lodging-related personal property | Available for 5, 7 and 15-year components |
| State conformity | Generally better — many states conform to 179 | Frequently decoupled, requiring an addback |
| Ordering | Applied first | Applied after 179, before regular MACRS |
The three differences that actually decide it
1. Section 179 cannot create a loss. Bonus can.
Section 179 is limited to your aggregate taxable income from the active conduct of trades or businesses. Bonus has no such limit. If your goal is to generate a loss that shelters other income — the usual goal in a cost segregation engagement — bonus is the tool.
2. Section 179 reaches building systems that bonus does not.
Roofs, HVAC, fire protection, alarm and security systems on nonresidential buildings are eligible for section 179 even though they are 39-year property ineligible for bonus. That is a meaningful and often overlooked planning point after a roof or HVAC replacement.
3. States frequently conform to 179 and decouple from bonus.
Where a state requires a bonus addback, an owner in that state may get a materially better combined result electing 179 on some assets even where bonus would produce the same federal deduction.
Section 179 and rental property
Section 179 requires property used in the active conduct of a trade or business. A rental activity may or may not rise to that level, and the distinction is fact-dependent. Owners of a single passive rental should not assume 179 is available; owners running a genuine rental business with substantial activity often can. This is worth a conversation before filing rather than a position taken on the return and defended later.
Figures above reflect Rev. Proc. 2025-32 for tax years beginning in 2026. Both the dollar cap and the phase-out threshold are indexed annually — confirm the current year's numbers before relying on them.
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