Section 179 + Bonus Depreciation Calculator — Tax Year 2026
Estimate your 2026 first-year equipment deduction. Models the inflation-adjusted Section 179 limit, the phase-out at $4.09M, and the 100 percent bonus depreciation under OBBBA. Results update instantly.
Planning estimate only — not tax advice. See Disclaimer.
What These Two Deductions Actually Do
Section 179 and bonus depreciation are the two main mechanisms federal tax law uses to let businesses deduct the full cost of equipment in the year of purchase, instead of spreading it over the asset's useful life through standard MACRS depreciation. The two work together. Section 179 is applied first, up to the inflation-adjusted limit and subject to a business income test. Bonus depreciation under IRC section 168(k) then applies to anything left over.
For 2026, IRS Revenue Procedure 2025-32 sets the Section 179 limit at $2,560,000 and the phase-out threshold at $4,090,000. These figures are inflation-adjusted from the post-OBBBA statutory base of $2,500,000 and $4,000,000 set by Section 70302 of the One Big Beautiful Bill Act. The phase-out reduces the available Section 179 deduction dollar-for-dollar once total Section 179 property placed in service during the year exceeds $4,090,000, reaching zero at $6,650,000.
Bonus depreciation under OBBBA Section 70307 is permanent at 100 percent for qualified property acquired and placed in service after January 19, 2025. The TCJA-era phase-down to 0 percent by 2027 was repealed. There is no business income limitation on bonus depreciation, so 100 percent of qualifying property cost is generally deductible in year one even when Section 179 is constrained by income or phased out by volume.
Your Numbers
$
Total cost of qualifying tangible business property — equipment, machinery, computers, off-the-shelf software, qualified real property improvements (roofs, HVAC, fire protection, alarm, security). Excludes inventory, land, intangibles, and property used predominantly outside the U.S.
$
Aggregate taxable income from the active conduct of any trade or business, before the Section 179 deduction. Section 179 cannot exceed this amount; the excess carries forward. Bonus depreciation is not subject to this limit.
For pass-through owners, use your individual marginal bracket. For C-corps, use the flat 21 percent corporate rate.
Estimate only — not a tax position.
The figures below are computed from the values you entered, simplified assumptions, and the federal Section 179 and Section 168(k) figures in effect for tax year 2026 as of 2026-05-07. They are not tax advice and do not create a CPA-client relationship. They do not capture facts specific to your return, listed-property and luxury-auto caps under section 280F, the SUV expensing limit, the qualified production property rules, mid-quarter convention, or state-level conformity (New Jersey decouples from federal bonus depreciation entirely and caps Section 179 at $25,000 for CBT purposes). Do not act on these numbers, file based on them, or include them in a tax position without a licensed tax professional reviewing your full situation. ProAxis Tax & Accounting Services makes no warranty as to accuracy and accepts no liability for reliance on this output. See full Disclaimer and Terms of Service.
Estimated 2026 First-Year Deduction
Section 179 Deduction
$0
Limited by inflation-adjusted cap, phase-out, and business income
Bonus Depreciation (100%)
$0
Applied to remaining basis after Section 179
Total First-Year Deduction
$0
Estimate as of 2026-05-07
Estimated Federal Tax Savings
$0
At entered marginal bracket
Worked Example 1 — Most Small Businesses
A NJ contractor purchases $500,000 of qualifying equipment (excavator, work trucks, tools) in 2026. The business has $800,000 of taxable income before depreciation. The equipment cost is well below the $4,090,000 phase-out threshold and well below the $2,560,000 Section 179 limit.
Section 179 deduction: The full $500,000 cost can be expensed under Section 179. Business income of $800,000 exceeds $500,000 so the income limitation is not binding. Section 179 deduction: $500,000.
Bonus depreciation: $0 — there is no remaining basis after Section 179 expensing.
Total first-year deduction: $500,000. At a 32 percent federal marginal bracket the federal tax saved on the deduction is roughly $160,000. Note that for NJ Corporation Business Tax purposes only $25,000 would be deductible (NJ Section 179 cap) with no bonus depreciation; the federal-NJ difference creates a book-to-tax adjustment tracked over the asset's life.
Worked Example 2 — Section 179 Phase-Out Hits
A NJ manufacturer purchases $5,000,000 of qualifying equipment in 2026. Business taxable income of $10,000,000.
Phase-out reduction: Cost of $5,000,000 minus phase-out threshold of $4,090,000 equals $910,000. The Section 179 limit of $2,560,000 is reduced by $910,000 to $1,650,000.
Section 179 deduction: $1,650,000 (the reduced limit, since cost exceeds it and business income is not the binding constraint).
Bonus depreciation: Remaining basis of $5,000,000 minus $1,650,000 equals $3,350,000. At 100 percent bonus depreciation, the full $3,350,000 is deducted in year one.
Total first-year deduction: $5,000,000 ($1,650,000 Section 179 + $3,350,000 bonus depreciation). At a 32 percent federal bracket the federal tax saved is roughly $1,600,000. Even with full Section 179 phase-out, 100 percent bonus depreciation captures the entire deduction in year one.
Worked Example 3 — Business Income Limitation Binds
A NJ business buys $300,000 of qualifying equipment in 2026 in a low-revenue year with only $200,000 of business taxable income.
Section 179 deduction: Limited to the lesser of the cost ($300,000), the limit ($2,560,000), and business income ($200,000). The income limit binds at $200,000.
Bonus depreciation: Remaining basis of $100,000 ($300,000 − $200,000) at 100 percent bonus depreciation is fully deductible. Bonus depreciation is not subject to a business income limitation, so even though the business has only $200,000 of income, the additional $100,000 deduction can create or increase a net operating loss.
Total first-year deduction: $300,000 ($200,000 Section 179 + $100,000 bonus depreciation). The full equipment cost is deducted in year one. If the business were to expense the entire $300,000 via Section 179 instead, the $100,000 in excess of business income would carry forward to a subsequent year — bonus depreciation captures it now.
After You Run the Calculator
The calculator output is a planning starting point, not a return-ready figure. Here is how to use the result:
If your equipment cost is below $4,090,000 the math is simple — full first-year deduction equal to cost (subject to business income limitation for the Section 179 portion). Bonus depreciation handles any remainder.
If your equipment cost is between $4,090,000 and $6,650,000 Section 179 is partially phased out, but 100 percent bonus depreciation still captures the rest. You still get a full first-year deduction equal to cost, but the split between Section 179 and bonus depreciation matters for state conformity (especially NJ which decouples from bonus depreciation).
If your equipment cost is above $6,650,000 Section 179 is fully phased out and the entire deduction comes from bonus depreciation. Same result for federal tax: full year-one deduction.
If your business income is low Section 179 carries forward, but bonus depreciation can create or grow an NOL that may offset future income or be used in the current year if other income exists.
Whatever the result, document the property type, in-service date, and cost. Section 179 vs. bonus depreciation selection is a real planning decision when state conformity matters (New Jersey, California, and other decoupling states) — the federal result may be identical but the multi-state impact is not.
How to Use This Calculator
Enter the equipment cost. Total cost of qualifying tangible business property placed in service during 2026 (machinery, equipment, computers, off-the-shelf software, qualified real property improvements). Excludes inventory, land, intangibles, and property used outside the U.S.
Enter business taxable income. Aggregate taxable income from the active conduct of any trade or business, before the Section 179 deduction. Determines whether the Section 179 income limitation binds.
Select your federal marginal bracket. Pass-through owners use individual brackets (22, 24, 32, 35, 37 percent). C-corps use the flat 21 percent corporate rate.
Read the results. The calculator shows the Section 179 deduction, the bonus depreciation deduction on remaining basis, the total first-year deduction, the estimated federal tax savings, and any carryforward.
Frequently Asked Questions
What are the 2026 Section 179 limits?
For tax year 2026, IRS Revenue Procedure 2025-32 section 4.24 sets the Section 179 expensing limit at $2,560,000 and the phase-out threshold at $4,090,000. The statutory base of $2,500,000 (limit) and $4,000,000 (phase-out) was established by the One Big Beautiful Bill Act effective for property placed in service in tax years beginning after December 31, 2024, then inflation-adjusted with calendar year 2024 as the base year. The phase-out reduces the limit dollar-for-dollar once the cost of Section 179 property placed in service during the year exceeds $4,090,000, fully zeroing the deduction at $6,650,000.
What is the 2026 bonus depreciation percentage?
100 percent. The One Big Beautiful Bill Act, section 70307, made 100 percent additional first-year bonus depreciation under IRC section 168(k) permanent for qualified property acquired and placed in service after January 19, 2025. The TCJA-era phase-down (60 percent for 2024, 40 percent for 2025, 20 percent for 2026, 0 percent thereafter) was repealed and replaced with the permanent 100 percent rule. Taxpayers may optionally elect the lower 40 percent (or 60 percent for certain longer-production property and aircraft) for property placed in service during the first tax year ending after January 19, 2025.
How do Section 179 and bonus depreciation interact?
Section 179 is applied first, up to the lesser of the property cost, the inflation-adjusted Section 179 limit, and the taxpayer's business taxable income. Bonus depreciation under section 168(k) then applies to any remaining basis at 100 percent for property placed in service after January 19, 2025 — and bonus depreciation is not subject to a business income limitation, so it can create or increase a net operating loss. In practice, for qualifying tangible property placed in service in 2026, the combination produces a full first-year deduction equal to the property cost in almost every case.
What property qualifies for Section 179?
Section 179 property under IRC section 179(d) means tangible property and certain computer software that is either Section 1245 property or, at the taxpayer's election, qualified real property, acquired by purchase for use in the active conduct of a trade or business. Qualified real property includes qualified improvement property and improvements to nonresidential real property such as roofs, HVAC, fire protection, alarm systems, and security systems. Inventory, land, and intangible assets other than computer software do not qualify. Property used predominantly outside the United States or used by tax-exempt organizations also does not qualify.
What is the Section 179 business income limitation?
Per IRC section 179(b)(3), the Section 179 deduction cannot exceed the taxpayer's aggregate amount of taxable income derived from the active conduct of any trade or business. Any disallowed amount is carried forward to subsequent years. For S-corporation and partnership owners, the limitation applies first at the entity level and then again at the owner level on the owner's combined business income. Bonus depreciation is not subject to this limitation.
Does New Jersey allow Section 179 and bonus depreciation?
Section 179: yes, but with a much lower limit. For NJ Corporation Business Tax purposes, NJ caps the Section 179 deduction at $25,000. Bonus depreciation: no — New Jersey decouples from federal bonus depreciation under N.J.S.A. 54:10A-4(k)(2)(F). NJ requires the depreciation to be computed using straight-line MACRS instead. The federal-vs-NJ depreciation difference is tracked as a permanent or temporary book-to-tax adjustment on the NJ return. ProAxis builds the federal-NJ depreciation schedule for every NJ business client placing significant property in service.
What does this calculator NOT include?
The calculator gives a directional estimate of the first-year deduction. It does not model the listed-property limitations (luxury auto caps under section 280F), the special rules for qualified production property under OBBBA section 70307, the SUV expensing limit under section 179(b)(5), passenger automobile depreciation caps, mid-quarter convention, or the optional opt-down election to 40 or 60 percent bonus depreciation. State conformity also varies. The calculator computes federal first-year deduction only.
Related ProAxis Resources
QBI Deduction Calculator — Section 179 reduces qualified business income by reducing W-2 wage capacity in the same year; the QBI computation interacts with depreciation choices
S-Corp Savings Calculator — entity choice affects how the Section 179 business income limitation applies (entity-level then owner-level)
NJ BAIT Savings Calculator — federal SALT cap workaround that pairs with major equipment purchases to maximize federal benefit
Tax Planning Service Hub — annual planning that integrates equipment purchase timing, Section 179 vs. bonus depreciation election, and state conformity
Self-Employment Tax Calculator — Section 179 deductions reduce net SE earnings on Schedule C, lowering both SE tax and federal income tax
Bookkeeping Cost Calculator — depreciation tracking is a per-account complexity driver; estimate the monthly bookkeeping fee that supports the depreciation schedule
Want a Precise First-Year Depreciation Analysis?
Schedule a free consultation with ProAxis Tax & Accounting Services. ProAxis runs the full federal-and-state depreciation analysis including listed-property caps, qualified production property rules, and NJ decoupling — far beyond what a generic calculator captures.
