Figures are for tax year 2026. This Guide covers United States federal income tax only, for a business owner deciding what to buy and when, and for their adviser. It covers the section 179 election, the section 168(k) special depreciation allowance ("bonus depreciation"), regular MACRS as the fallback, business vehicles, recapture, and Form 4562. State rules differ: see us-state-bonus-depreciation-conformity-matrix. Cost segregation of buildings is in us-federal-cost-segregation. Rental property and the passive activity rules are in us-real-estate-professional-and-short-term-rentals. Official sources were read on 3 October 2026. Worked examples use hypothetical amounts and are labelled as such.
The method, step by step
- Fix the two dates for each asset: the date it was acquired (for a written binding contract, the contract date rules below) and the date it was placed in service. The bonus depreciation rate turns on the acquisition date; both deductions are claimed for the year the asset is placed in service. See OBBBA section 70301(c), Public Law 119-21 and 26 U.S.C. 179(a), LII mirror of the U.S. Code.
- Classify the asset. Section 179 needs section 1245 property (tangible personal property and similar), qualifying off-the-shelf software, or, by election, qualified real property, bought for use in the active conduct of a trade or business (26 U.S.C. 179(d)(1) and (e), LII mirror). Bonus depreciation needs qualified property, mainly property with a MACRS recovery period of 20 years or less (26 U.S.C. 168(k)(2), LII mirror).
- For a vehicle or other listed property, establish the business use percentage for the year and, for a vehicle, its weight rating. Business use must be more than 50 percent for bonus depreciation or section 179 to be available (26 U.S.C. 280F(b) and (d)(1), LII mirror).
- Apply the deductions in the order the form uses: section 179 first, then the special depreciation allowance on the remaining basis, then regular MACRS on what is left (Instructions for Form 4562, Line 11 and Part II).
- Decide how much to take now. Section 179 is chosen item by item and amount by amount. Bonus depreciation applies automatically unless the taxpayer elects out for a whole class of property for the year (26 U.S.C. 168(k)(7), LII mirror). See "Choosing less depreciation now" below.
- Report on Form 4562 with the return for the year the asset is placed in service, make any election out by statement with the timely filed return, and keep the records listed below (Instructions for Form 4562).
- On a later sale, or if business use of listed property falls to 50 percent or less, compute recapture (26 U.S.C. 1245, LII mirror; 26 U.S.C. 280F(b)(2), LII mirror).
Section 179: the 2026 limits
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-25-32.pdf |
|---|
| Item | 2026 figure | Note (Rev. Proc. 2025-32, section 3.24) |
| Maximum section 179 expense, taxable years beginning in 2026 | USD 2,560,000 | "the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $2,560,000" |
| Phase-out threshold: the limit falls by the cost of section 179 property placed in service in the year above this amount | USD 4,090,000 | "placed in service during the 2026 taxable year exceeds $4,090,000" |
| Maximum cost of a sport utility vehicle taken into account under section 179 | USD 32,000 | "the cost of any sport utility vehicle that may be taken into account under § 179 cannot exceed $32,000" |
The base amounts in the statute were raised by OBBBA section 70306 for property placed in service in taxable years beginning after 31 December 2024; the 2026 figures in the table above are the inflation-adjusted amounts for taxable years beginning in 2026 (OBBBA section 70306).
- Phase-out is dollar for dollar, not a cliff. The limit is "reduced (but not below zero)" by the excess cost over the threshold in the table above. Part of the limit survives until the excess equals the whole limit (26 U.S.C. 179(b)(2), LII mirror).
- Business income limit. The section 179 deduction, after the dollar limit and phase-out, cannot exceed the taxpayer's taxable income from the active conduct of any trade or business for the year, computed without the section 179 deduction. For an individual, that income includes wages, salaries, tips and other compensation earned as an employee, not reduced by unreimbursed employee expenses, and spouses filing jointly combine their totals (Instructions for Form 4562, Line 11). The excess is not lost: it carries forward to later years and is allowed when there is room under both the dollar limit and the income limit (26 U.S.C. 179(b)(3), LII mirror). A mere passive investor does not actively conduct a trade or business (Instructions for Form 4562, Line 11).
- Placed-in-service year. The deduction is allowed for the taxable year the property is placed in service, not the year it is paid for or ordered (26 U.S.C. 179(a), LII mirror).
- The election. It is made on the return for the year, and it names each item and the part of its cost to expense. A taxpayer may revoke it for any property, and the revocation cannot then be undone (26 U.S.C. 179(c), LII mirror).
- Qualifying property. Tangible property to which section 168 applies, or off-the-shelf computer software, that is section 1245 property or (at the taxpayer's election) qualified real property, and is acquired by purchase for use in the active conduct of a trade or business. "Purchase" excludes property bought from certain related persons or within a controlled group, and property whose basis carries over from the seller or comes from a decedent (26 U.S.C. 179(d)(1) to (3), LII mirror). When qualifying property is bought with cash plus a trade-in, only the cash paid counts as cost for section 179 (26 U.S.C. 179(d)(3), LII mirror).
- Qualified real property. Qualified improvement property (an improvement to the interior of a nonresidential building placed in service after the building was first placed in service, other than an enlargement, an elevator or escalator, or the internal structural framework), and these improvements to nonresidential real property placed in service after the property was first placed in service: roofs; heating, ventilation and air-conditioning property; fire protection and alarm systems; security systems (26 U.S.C. 179(e), LII mirror; 26 U.S.C. 168(e)(6), LII mirror).
- Who cannot use it, or uses it differently. Estates and trusts cannot use section 179. A noncorporate lessor can use it only in the limited cases in section 179(d)(5). For a partnership or S corporation the limits apply at the entity level and again for each partner or shareholder. Spouses filing separately are one taxpayer for the dollar limit and phase-out (26 U.S.C. 179(b)(4) and (d)(4), (5), (8), LII mirror).
Bonus depreciation (section 168(k)) after the One Big Beautiful Bill Act
| Source | all figures below | https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm |
|---|
| Item | Figure | Note (Public Law 119-21, section 70301) |
| Rate for qualified property | 100 percent | "by striking the applicable percentage'' and inserting 100 percent''" |
| Start: property acquired after this date | January 19, 2025 | "shall apply to property acquired after January 19, 2025" |
| Optional reduced rate, first taxable year ending after 19 January 2025 only | 40 percent | "by substituting 40 percent' for 100 percent'" (60 percent for longer-production property and certain aircraft) |
| Acquisition date | written binding contract | "property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition" |
- Who and when. The 100 percent allowance in the table above applies to qualified property acquired after 19 January 2025. The Act removed the old placed-in-service deadline and the year-by-year phase-down for that property, so there is no scheduled reduction for property acquired after that date (Notice 2026-11, sections 3.06 and 3.07). The reduced-rate election in the table above is only for the first taxable year ending after 19 January 2025; for a calendar-year taxpayer that was 2025, so it is not available for 2026.
- Property acquired before 20 January 2025 but placed in service in 2026 keeps the old phase-down. The rate for that property is in the Rev. Proc. 2026-15 table below.
- What "acquired" means. The Act's rule in the table above, read with Notice 2026-11 section 3.03, applies the existing regulation rules with the 2025 dates. For property acquired under a written binding contract, the acquisition date is the latest of: the date the contract was entered into, the date it is enforceable under state law, the date all cancellation periods end, and the date all contingency conditions are satisfied. A written binding contract is one enforceable under state law that does not limit damages to a specified amount (for example a liquidated damages clause). Property bought under a non-binding contract is acquired when the taxpayer has paid or incurred more than 10 percent of the total cost, excluding land and preliminary activities. Self-constructed property, including property a contractor builds under a binding contract made before work starts, is acquired when physical work of a significant nature begins (Notice 2026-11, section 2.03(2)).
- Qualified property. Mainly property with a recovery period of 20 years or less, certain software and water utility property (26 U.S.C. 168(k)(2)(A), LII mirror). Qualified improvement property is 15-year property, so it qualifies (26 U.S.C. 168(e)(3)(E)(vii), LII mirror). Nonresidential real property itself (a building, a roof, building systems that are not qualified improvement property) is depreciated over 39 years and does not qualify. Property that must use the alternative depreciation system does not qualify, including listed property used 50 percent or less for business (26 U.S.C. 168(k)(2)(D), LII mirror; Instructions for Form 4562, Part II exceptions).
- Used property qualifies, with conditions. Either the original use begins with the taxpayer, or the taxpayer did not use the property at any time before acquiring it AND the purchase meets the related-party, controlled-group and no-carryover-basis rules of section 179(d)(2) and (3) (26 U.S.C. 168(k)(2)(A)(ii) and (E)(i), LII mirror). The taxpayer is treated as having used the property before only if it, or a predecessor, had a depreciable interest in it in the five calendar years before the year it is placed in service, or earlier in that year, whether or not depreciation was claimed. A lessee that only leased the property, with no depreciable interest in it, has not used it; basis attributable to the lessee's own improvements to that property does not qualify (Reg. 1.168(k)-2(b)(3)(iii)(B)(1), eCFR).
- Election out, by class. A taxpayer may elect out for any class of property for a taxable year. The election covers ALL qualified property in that class placed in service that year, not single items, and can be revoked only with IRS consent (26 U.S.C. 168(k)(7), LII mirror). It is made by statement attached to the timely filed return (including extensions), and each owner makes it separately: the partnership, the S corporation, or each member of a consolidated group (Instructions for Form 4562, Part II "Election out").
- No income limit. Section 168(k) has no limit tied to business taxable income, unlike section 179(b)(3). Bonus depreciation can therefore create or increase a loss, and the loss then meets the owner-level loss limits. For individuals and other noncorporate taxpayers the excess business loss limit in section 461(l) was made permanent by OBBBA section 70601 (Public Law 119-21). This Guide does not compute those limits: refer.
Business vehicles
Which rules apply: the 6,000-pound line
A "passenger automobile" for the depreciation caps is a 4-wheeled vehicle made mainly for public roads and rated at 6,000 pounds unloaded gross vehicle weight or less; for a truck or van the test uses gross vehicle weight. Ambulances, hearses, vehicles used directly in a business of transporting people or property for hire and, under regulations, certain trucks and vans are excluded (26 U.S.C. 280F(d)(5), LII mirror). For a truck or van the test is gross vehicle weight, the rating on the manufacturer's label. For any other vehicle the test is unloaded gross vehicle weight, which is not the label's gross rating. Whether a sport utility vehicle is a truck or van for this test is set by regulations this Guide does not cover; if the two measures fall on different sides of 6,000 pounds, refer.
- At or under the line: the annual caps in the Rev. Proc. 2026-15 table below limit depreciation, section 179 and bonus combined (26 U.S.C. 280F(a) and (d)(1), LII mirror).
- Over the line: the caps do not apply. A sport utility vehicle (a 4-wheeled passenger vehicle not subject to section 280F and rated at not more than 14,000 pounds gross vehicle weight) is limited for section 179 only, to the SUV figure in the Rev. Proc. 2025-32 table above. The SUV definition excludes a vehicle seating more than 9 persons behind the driver's seat, one with an open cargo area at least 6 feet long not readily reachable from the passenger compartment (or designed as an open area but enclosed by a cap), and certain cab-forward vans (26 U.S.C. 179(b)(5), LII mirror). The SUV cap does not limit bonus depreciation.
- Either way the vehicle is listed property ("any other property used as a means of transportation"), so the more-than-50-percent business use rule below applies (26 U.S.C. 280F(d)(4), LII mirror).
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-26-15.pdf |
|---|
| Passenger automobile placed in service in 2026 | Cap | Note (Rev. Proc. 2026-15, Tables 1 and 2) |
| Year 1, bonus depreciation applies (Table 1) | USD 20,300 | "1st Tax Year $ 20,300 2nd Tax Year $ 19,800" |
| Year 1, no bonus depreciation (Table 2) | USD 12,300 | "1st Tax Year $ 12,300 2nd Tax Year $ 19,800" |
| Year 2, both tables | USD 19,800 | "2nd Tax Year $ 19,800 3rd Tax Year $ 11,900" |
| Year 3, both tables | USD 11,900 | "3rd Tax Year $ 11,900 Each Succeeding Year $ 7,160" |
| Each later year, both tables | USD 7,160 | "Each Succeeding Year $ 7,160" |
| Bonus rate for property acquired after 27 September 2017 and before 20 January 2025, placed in service in 2026 | 20 percent | "placed in service during calendar year 2026 is 20 percent" |
- Table 2 applies (no bonus) if the car was used 50 percent or less for business in 2026, the taxpayer elected out for the class that includes passenger automobiles, a used car failed the acquisition rules, or the car was acquired before 28 September 2017 (Rev. Proc. 2026-15, section 2.03).
- The cap is applied first, and then reduced for personal use: a car used 80 percent for business gets 80 percent of the cap (26 U.S.C. 280F(a)(2), LII mirror). Basis not recovered in the recovery period is deducted after it, at no more than the later-year cap each year (26 U.S.C. 280F(a)(1)(B), LII mirror).
More than 50 percent business use, and recapture
- If listed property is not used more than 50 percent in a qualified business use in a year, depreciation for that year and later years uses the alternative depreciation system (26 U.S.C. 280F(b)(1) and (3), LII mirror). That takes it out of bonus depreciation (26 U.S.C. 168(k)(2)(D), LII mirror), and section 280F(d)(1) applies the same limit to a section 179 deduction.
- If business use was more than 50 percent in the year placed in service and falls to 50 percent or less in a later year, the "excess depreciation" (what was claimed, including section 179 and bonus, minus what the alternative depreciation system would have allowed) is included in income in that later year (26 U.S.C. 280F(b)(2) and (d)(1), LII mirror; 26 U.S.C. 168(k)(2)(F)(ii), LII mirror). Section 179 has its own recapture when any section 179 property stops being used predominantly in a trade or business (26 U.S.C. 179(d)(10), LII mirror). The recapture is reported as ordinary income in Part IV of Form 4797 and added to basis (Publication 946, chapter 2, "When Must You Recapture the Deduction?").
- Owners and related persons. Qualified business use does NOT include leasing the vehicle to a 5-percent owner or related person, or letting a 5-percent owner or related person use it as compensation for services. It also excludes use by any other person as compensation unless the value is included in that person's income (with withholding where required) (26 U.S.C. 280F(d)(6)(C), LII mirror). An owner-employee's personal use of a company vehicle can sink the 50 percent test.
- No depreciation or section 179 deduction is allowed for listed property unless business use is proved with adequate records or sufficient evidence (Publication 946, chapter 5, "What Records Must Be Kept?").
Standard mileage rate or actual expenses
| Source | all figures below | https://www.irs.gov/pub/irs-drop/n-26-10.pdf |
|---|
| Item | Figure | Note (Notice 2026-10) |
| Business standard mileage rate, 1 January to 30 June 2026 | 72.5 cents per mile | "The standard mileage rate for transportation or travel expenses for 2026 is 72.5 cents per mile" |
| Part of the business rate treated as depreciation, 2026 | 35 cents per mile | "and 35 cents per mile for 2026" |
- Two business rates apply in 2026. Split business miles by the date driven and apply the rate for each period from the tables above.
- For a car the taxpayer owns, the standard mileage rate must be chosen in the first year the car is available for business use; later the taxpayer can switch between methods, but a switch to actual expenses uses straight-line depreciation. For a leased car, the standard rate must be used for the whole lease if it is used at all (Publication 463, chapter 4).
- The standard mileage rate cannot be used for a car on which the taxpayer claimed section 179, the special depreciation allowance, MACRS, or any depreciation method other than straight line, or if the taxpayer uses five or more cars for business at the same time (Publication 463, chapter 4). So the choice in year 1 is real: a large first-year deduction closes the mileage route for that car.
- Under the standard rate, the depreciation part per mile in the Notice 2026-10 table above reduces the car's basis.
Choosing less depreciation now
The law lets the owner take less than the maximum. Reasons to do so, each from the rules above:
- The section 179 income limit. Section 179 beyond business taxable income only carries forward. Bonus depreciation has no income limit but can create a loss that other rules then limit. Expensing more than the year can absorb may only move the deduction into a carryforward or a limited loss.
- A higher tax rate later. A deduction saves tax at the rate of the year it is taken. If the owner expects higher taxable income in later years, spreading cost through regular MACRS may save more in total. This is a projection the adviser makes; it is not a rule.
- Recapture risk. A vehicle whose business use may fall to 50 percent or less, or an asset likely to be sold soon, brings the deduction back as ordinary income (see "Recapture on sale" below).
- States. A state may not follow federal bonus depreciation or the federal section 179 limit, which can leave a state difference to track for years. See
us-state-bonus-depreciation-conformity-matrix.
The tools: elect section 179 for exactly the amount wanted, item by item (26 U.S.C. 179(c), LII mirror); elect out of bonus for a whole class (26 U.S.C. 168(k)(7), LII mirror). Bonus depreciation is the default: an owner who wants regular MACRS on an asset that qualifies must elect out for its class, and that election covers every asset in the class placed in service that year.
Worked examples (hypothetical amounts)
Example 1: the business income limit
| Source | all figures below | https://www.law.cornell.edu/uscode/text/26/179 |
|---|
| Step | Amount | Note |
| New machinery bought and placed in service in 2026, acquired after 19 January 2025 (hypothetical) | USD 300,000 | section 179 property and qualified property |
| Business taxable income before any section 179 deduction (hypothetical) | USD 120,000 | section 179(b)(3)(C) |
| Option A: elect section 179 for the full cost; deduction allowed in 2026 | USD 120,000 | limited to business taxable income |
| Option A: carried forward to later years | USD 180,000 | USD 300,000 minus USD 120,000, section 179(b)(3)(B) |
| Option B: no section 179 election, bonus depreciation on the full cost | USD 300,000 | section 168(k)(1), no income limit |
| Option B: resulting business loss before other limits | USD 180,000 | refer: owner-level loss limits apply |
| Option C: section 179 for the amount of business income, and elect out of bonus for the machinery's class | USD 120,000 | the remaining USD 180,000 is depreciated under regular MACRS from 2026 |
In Option C, if the owner does NOT elect out, bonus depreciation applies automatically to the remaining USD 180,000 and the result is the same as Option B.
Example 2: the phase-out
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-25-32.pdf |
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| Step | Amount | Note |
| Section 179 property placed in service in the 2026 taxable year (hypothetical) | USD 4,200,000 | total cost |
| Amount above the threshold | USD 110,000 | USD 4,200,000 minus USD 4,090,000 |
| Section 179 limit after phase-out | USD 2,450,000 | USD 2,560,000 minus USD 110,000 |
The rest of the cost is still eligible for bonus depreciation if it is qualified property, because the phase-out limits section 179 only.
Example 3: a passenger car (6,000 pounds or less)
| Source | all figures below | https://www.irs.gov/pub/irs-drop/rp-26-15.pdf |
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| Step | Amount | Note |
| Car cost, acquired after 19 January 2025 and placed in service in 2026, used 80 percent for business all year (hypothetical) | USD 50,000 | passenger automobile, bonus applies |
| Year 1 cap with bonus (Table 1) | USD 20,300 | applied before the personal-use reduction |
| Year 1 deduction: cap times business use | USD 16,240 | USD 20,300 times 80 divided by 100 |
After a 100 percent allowance limited by the year 1 cap, the rest of the business-use basis is unrecovered basis. Under the statute it is deducted only after the recovery period, at the later-year cap each year. Rev. Proc. 2019-13 gives a safe harbor, adopted on the return for the year after the placed-in-service year, that instead spreads the remaining basis over years 2 to 6 using the optional depreciation table, each year capped (Rev. Proc. 2019-13, section 4). It does not apply if any section 179 was elected on the car.
A larger section 179 election on this car changes nothing: section 179 and bonus together cannot exceed the cap (26 U.S.C. 280F(d)(1), LII mirror).
Example 4: a heavy SUV (over 6,000 pounds gross vehicle weight)
| Source | all figures below | https://www.law.cornell.edu/uscode/text/26/179 |
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| Step | Amount | Note |
| SUV cost, rated over 6,000 pounds, acquired after 19 January 2025, placed in service in 2026, used 100 percent for business (hypothetical) | USD 80,000 | not a passenger automobile, so no 280F(a) cap; still listed property |
| Default: bonus depreciation, year 1 | USD 80,000 | section 168(k)(1) |
| If the owner elected out of bonus for the vehicle's class: maximum section 179 | USD 32,000 | SUV cap, section 179(b)(5) |
| Left for regular MACRS in that case | USD 48,000 | USD 80,000 minus USD 32,000 |
If business use later falls to 50 percent or less, the excess over the alternative depreciation system amount is recaptured that year (section 280F(b)(2)).
Example 5: recapture on sale
| Source | all figures below | https://www.law.cornell.edu/uscode/text/26/1245 |
|---|
| Step | Amount | Note |
| Recomputed basis: the SUV in Example 4, fully deducted in 2026, adjusted basis zero (hypothetical) | USD 80,000 | section 179 and bonus are added back, section 1245(a)(2) |
| Sale price in a later year (hypothetical) | USD 45,000 | amount realized |
| Ordinary income under section 1245 | USD 45,000 | lower of USD 80,000 and USD 45,000, minus adjusted basis of zero |
Example 6: mileage across the rate change
| Source | all figures below | https://www.irs.gov/tax-professionals/standard-mileage-rates |
|---|
| Step | Amount | Note |
| 5,000 business miles from 1 January to 30 June 2026 at 72.5 cents (hypothetical miles) | USD 3,625 | 5,000 times 72.5 cents |
| 7,000 business miles from 1 July to 31 December 2026 at 76 cents (hypothetical miles) | USD 5,320 | 7,000 times 76 cents |
| Standard mileage deduction for 2026 | USD 8,945 | sum of the two periods |
Example 7: a contract signed too early (no amounts)
A business signed a written binding contract on 10 January 2025 for equipment with no contingency or cancellation clause, took delivery and placed it in service in March 2026. It was acquired before 20 January 2025, so the 2026 bonus rate is the 20 percent in the Rev. Proc. 2026-15 table above, not 100 percent (Notice 2026-11, sections 2.03(2) and 3.03; Rev. Proc. 2026-15). Section 179 is unaffected: it looks at the placed-in-service year.
Example 8: a new roof on an office building (no amounts)
A roof on nonresidential real property placed in service after the building was first placed in service is qualified real property, so section 179 can apply if the owner elects to treat it so (26 U.S.C. 179(d)(1)(B)(ii) and (e)(2), LII mirror). A roof is not an interior improvement, so it is not qualified improvement property; it stays 39-year nonresidential real property and gets no bonus depreciation (26 U.S.C. 168(e)(6) and (k)(2)(A), LII mirror). For a whole building, see us-federal-cost-segregation.
Recapture on sale (section 1245)
When section 1245 property is sold, the gain up to the depreciation taken is ordinary income: the lower of the recomputed basis and the amount realized, minus the adjusted basis. Section 179 deductions count as depreciation for this purpose (26 U.S.C. 1245(a)(1) and (2), LII mirror). Expensing an asset in year 1 does not remove the tax; on a sale it turns later gain into ordinary income. Like-kind exchanges and other exceptions are outside this Guide.
Form 4562 and the records to keep
File Form 4562 for a year in which the taxpayer claims depreciation for property placed in service that year, a section 179 deduction (including a carryover), or depreciation on any vehicle or other listed property whatever year it was placed in service (Instructions for Form 4562, "Who Must File"). Part I is the section 179 election, Part II the special depreciation allowance, Part III regular MACRS, and Part V listed property. The instructions cited are the 2025 edition, the edition irs.gov served on 3 October 2026.
Keep, for each asset, as permanent records (Instructions for Form 4562, "Recordkeeping"):
- Invoice and proof of payment; the contract, with its signing date and any contingency or cancellation clauses (the acquisition date).
- Evidence of the placed-in-service date: delivery, installation and first business use.
- For used property: who sold it, and whether the taxpayer or a predecessor had a depreciable interest in it in the five prior calendar years or earlier in the year it is placed in service (a plain lease is not one).
- For vehicles: the gross vehicle weight rating from the manufacturer's label, and a business-use log with dates, miles and purpose, for every year of the recovery period.
- The section 179 election detail (items and amounts), any carryforward, and any election-out statement.
- The depreciation basis, method and history needed later for recapture.
Ask the client first
- When was each asset contracted for, delivered and placed in service? Was any contract signed before 20 January 2025?
- New or used? If used, who sold it (a relative, a related company, a business the owner controls) and did the business or a predecessor hold a depreciable interest in it before, for example as owner or through improvements it depreciated?
- For a vehicle: the gross vehicle weight rating, the business-use percentage this year and expected in later years, and whether an owner, a relative or an employee drives it personally.
- What is the business taxable income this year before depreciation, and what is expected in the next few years? Is a loss likely?
- What is the entity: sole proprietor, partnership, S corporation, C corporation, trust or estate? Are spouses filing separately? Is the business in a controlled group?
- Which state or states tax the business, and is a sale of the asset planned in the next few years?
When to refuse or refer
- Estates and trusts: section 179 does not apply (26 U.S.C. 179(d)(4), LII mirror). Refer.
- Partnerships and S corporations where the section 179 limit must be tested at both levels, controlled groups sharing one limit, and noncorporate lessors: refer to the accountant preparing the entity return (26 U.S.C. 179(d)(5) to (8), LII mirror).
- A year where depreciation creates or increases a loss: the owner-level loss limits (basis, at-risk, passive activity, excess business loss) are outside this Guide. Refer.
- Rental real estate and short-term rentals: see
us-real-estate-professional-and-short-term-rentals. Buildings and cost segregation studies: see us-federal-cost-segregation.
- Vehicles provided to 5-percent owners or related persons, leased vehicles (the lease inclusion rules), and qualified nonpersonal use vehicles: refer.
- Property with long production periods, aircraft, self-constructed property, qualified production property under section 168(n), and specified plants: the special rules are outside this Guide. Refer.
- Refuse to claim bonus depreciation or section 179 on a vehicle with no business-use record, or to back-date a contract or placed-in-service date.
Sources
- Rev. Proc. 2025-32 (2026 inflation adjustments, section 3.24)
- Public Law 119-21 (One Big Beautiful Bill Act), sections 70301, 70306 and 70601, on GovInfo
- Notice 2026-11 (interim guidance on section 168(k))
- Rev. Proc. 2026-15 (2026 passenger automobile limits)
- Notice 2026-10 (2026 standard mileage rates)
- IRS standard mileage rates page
- Rev. Proc. 2019-13 (section 280F(a) safe harbor for passenger automobiles)
- Reg. 1.168(k)-2(b)(3)(iii)(B)(1), eCFR
- 26 U.S.C. 179, LII mirror of the U.S. Code
- 26 U.S.C. 168, LII mirror of the U.S. Code
- 26 U.S.C. 280F, LII mirror of the U.S. Code
- 26 U.S.C. 1245, LII mirror of the U.S. Code
- Instructions for Form 4562 (2025)
- Publication 946 (2025), How To Depreciate Property
- Publication 463 (2025), Travel, Gift, and Car Expenses