Bonus Depreciation vs. Section 179 in 2026: Which One Should Your Business Use?

When a grading contractor came to us as a new client this year, one of the first things we did was review his prior-year return. In December 2025, he had bought a $300,000 excavator and written off the full cost on his federal return using bonus depreciation.  

 

The problem was his Georgia return. Georgia does not recognize bonus depreciation, so only a fraction of that $300,000 was deducted there. Had the return used Section 179 instead, Georgia would generally have allowed the full deduction too.  

 

Bonus depreciation vs. Section 179 is one of the most common questions we hear in the fourth quarter. Both let you write off equipment faster than the normal schedule, and both can make a big difference in this year’s tax bill. But they have different rules, and as our new client found out, Georgia only recognizes one of them.  

 

The good news is that the 2025 federal tax law, the One Big Beautiful Bill Act, made both more generous and a lot more predictable. Here is how we think through it.  

 

First, What Both of Them Actually Do  

Normally, when you buy equipment, you deduct the cost a little at a time over its useful life, usually five to seven years for most equipment. That is called depreciation, and it matches the deduction to the years you use the asset.  

 

Bonus depreciation and Section 179 both let you skip most of that waiting and deduct the cost in the year you start using the equipment. Think of them as two doors into the same room. The total deduction over time is the same. The timing is not.  

 

For an owner in the 32% federal bracket, a $300,000 write-off is worth up to $96,000 in federal tax. Taking it all this year does not make the deduction bigger , but i t does move most of th e savings into this year, when the cash may matter most.  

 

The total deduction is the same…the timing is not.  

 

Bonus Depreciation: The Wide Door  

Under the 2025 law, bonus depreciation is back to 100% for qualifying property acquired and placed in service after January 19, 2025, and it is now permanent. There is no dollar cap. It applies to new and used equipment, as long as the used equipment is new to you .  

 

Bonus depreciation can also create or increase a loss for the year. For a business with a big purchase in a modest year, that loss may carry forward and offset income in later years.  

 

The catch is that bonus depreciation applies to every asset in the same class, such as all of your 7-year equipment, unless you elect out for that whole class. It is a wide door, but not a very precise one.  

 

Section 179: The Door With a Few More Rules  

Section 179 lets you choose, asset by asset, how much to expense immediately. For tax years beginning in 2026, the limit is $2,560,000, and it phases out dollar for dollar once you place more than $4,090,000 of qualifying property in service during the year.  

 

Section 179 has one important limit bonus depreciation does not: it cannot create a loss. The deduction is capped at your taxable business income for the year, and anything above that carries forward.  

 

For most businesses with $3 million to $30 million in revenue, the dollar caps will not be the issue. Flexibility is. Section 179 lets you expense one machine this year and depreciate a similar one normally, or expense just part of an asset’s cost, if that fits your plan better.  

 

Why Georgia Changes the Math  

Here is why our new client’s Georgia deduction came up short. Georgia does not follow federal bonus depreciation. If you take bonus depreciation on your federal return, your Georgia return still depreciates that equipment over the normal schedule.  

 

Georgia does follow Section 179, including the higher federal limits. The main exception is certain building improvements, such as roofs, HVAC, security systems and interior improvements to commercial space, which Georgia will not let you expense. For most equipment, electing Section 179 on your federal return generally gets you the same deduction on your Georgia return.  

 

For our new client, that was the whole difference. With Section 179, Georgia would generally have allowed the full $300,000, as long as his business income supported it. With bonus depreciation, his Georgia deduction gets spread over the next several years.  

 

Neither approach is ‘wrong’, per se , and the federal savings are usually the bigger number anyway . But the Georgia side of the return belongs in the conversation, especially given our state tax rate is effectively a flat rate that doesn’t include higher tax brackets that could make the decision to delay deductions more advantageous .  

 

Georgia does not recognize bonus depreciation. It does recognize Section 179.  

 

The Rule That Matters More Than Which Door You Pick  

To count for 2026, equipment has to be placed in service by December 31. That means delivered, set up and ready to use for its intended purpose. Ordering it is not enough. Paying for it is not enough. A machine still in its crate on December 31 is a 2027 deduction.  

 

If you are planning a year-end purchase, build in time for delivery and setup. Supply chain delays do not care about your tax planning.  

 

Making the Decision  

Start with whether you need the equipment. A deduction is never a good reason on its own to spend money you would not otherwise spend. If the purchase makes sense for the business, then the question becomes timing and method.  

 

Bonus depreciation usually fits when a purchase is more than Section 179 allows, whether because of the dollar limit or your income, or when a loss this year would help. Section 179 usually fits when you want Georgia to match your federal deduction, want to pick and choose assets, or want to save some deductions for years when your income may be higher.  

 

You can also use both. For many Georgia businesses with solid income, a good starting point is Section 179 first, with bonus depreciation picking up whatever Section 179 cannot cover.  

 

The right answer depends on your income this year and next, your entity type, and your state picture. That is exactly the kind of decision worth making before you sign the purchase order, not after.  

 

Ready to Talk Strategy?  

 

If you are planning a significant equipment purchase before year-end and want the full benefit on both your federal and Georgia returns, we are happy to run the numbers with you. Our Year-End Planning Sprint is built for exactly this decision, with enrollment open through December 1. We work with business owners in Duluth, Gwinnett County, across Georgia...and the first conversation is always on us.