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Two ways to write off asset purchases faster. They overlap, but the differences — dollar caps, loss rules, and how you elect them — change which one saves you more.
Short answer: Section 179 lets you expense qualifying purchases up to an annual dollar cap, but can't create a taxable loss. Bonus depreciation has no dollar cap and can create a loss — and under current law it's back to 100% for property placed in service in 2025 and after. Many businesses use both; the order and interaction is where the planning lives.
| Factor | Section 179 | Bonus Depreciation |
|---|---|---|
| Annual dollar cap | Yes (indexed annually), with a phase-out threshold | No cap |
| Can create a loss? | No — limited to business taxable income | Yes — can push income below zero |
| How you apply it | Elected asset-by-asset, flexible amounts | Applies to a whole asset class unless you elect out |
| Rate | 100% of cost up to the cap | 100% for property placed in service 2025+ (current law) |
| Best when | You want to fine-tune the deduction and stay profitable | You want maximum front-loaded deduction, incl. a loss |
You want precise control — deduct exactly enough to hit a target income, keep the rest for future years, and avoid creating a loss you can't use. Good for steadily profitable businesses.
You want to deduct as much as possible now, including generating a loss that offsets other income — central to the short-term-rental tax strategy and cost segregation.
They're not either/or — they stack, and the order matters. Section 179 is applied first (and can't create a loss), then bonus depreciation runs on what's left (and can). For real-estate and STR investors, bonus depreciation paired with a cost-seg study is usually the bigger lever because there's no cap and it can offset active income when you qualify. But state conformity differs, recapture applies on sale, and using a loss you can't actually deduct wastes it. This is exactly the modeling we do before you file. Estimate the effect with our depreciation calculator.
Not sure which mix saves you more — or whether a loss is even usable this year? We model it before you file.
Book a free consultationSection 179 has an annual dollar cap and can't create a taxable loss (it's limited to business income); bonus depreciation has no cap and can create a loss. Section 179 is elected asset-by-asset; bonus applies to a whole asset class unless you elect out. Many businesses use both.
Yes, and it's common. Section 179 is applied first and can't push you into a loss; bonus depreciation then runs on the remaining basis and can create a loss. Sequencing them correctly is part of the planning and affects how much you actually deduct.
Under current federal law, bonus depreciation is 100% for qualifying property placed in service in 2025 and after. Rules and rates have changed repeatedly, and state conformity varies, so confirm the current figures for your placed-in-service date with a tax advisor before relying on them.
For real-estate and STR investors, bonus depreciation paired with a cost segregation study is usually the bigger lever — no dollar cap, and it can offset active income when you meet the short-term-rental material-participation tests. Section 179 is more limited for real property. Model both, and account for recapture on sale.
General information, not tax or accounting advice. Your situation and current law (which changes) govern; confirm with a qualified advisor.