Does 100% bonus depreciation apply to used equipment?

Yes. Used property qualifies for 100% bonus depreciation as long as its original use did not begin with you, you had not previously used it, and you did not acquire it from a related party. This is what lets cost segregation studies and used-equipment purchases be fully expensed, not just new assets.

What is the difference between bonus depreciation and Section 179?

Both write off asset cost up front, but Section 179 is capped at $2,560,000 for 2026, phases out above $4,090,000 of purchases, and cannot create a loss. Bonus depreciation under §168(k) has no dollar cap and no income limit, so it can push a business into a loss. Bonus is elected by asset class; Section 179 can be applied to the exact dollar.

Is 100% bonus depreciation going to phase out again?

Not on the current schedule. The One Big Beautiful Bill Act made 100% bonus depreciation permanent for property acquired after January 19, 2025, with no scheduled expiration, unlike the 2017 law that phased it down to 40% for 2025 and toward zero. A future Congress could always change it, but there is no built-in sunset now.

How does the IRS define the acquisition date for bonus depreciation?

By the binding written contract date, not delivery or payment. Per IRS Notice 2026-11, property is acquired when you enter a binding written contract to buy it. A contract signed on or before January 19, 2025 keeps the asset on the 40% phase-down even if delivered later; self-constructed property is tested by when construction began.

Can bonus depreciation create a tax loss for my business?

Yes. Unlike Section 179, bonus depreciation is not limited to business taxable income, so it can generate or increase a net operating loss. That loss may then be subject to the excess business loss limitation for the year, which caps how much of it you can use against other income, so the deduction and the loss rules have to be modeled together.

The Journal / Business Tax

100% Bonus Depreciation Returns: The January 19, 2025 Cutoff.

By Ewan Morkel, EAJuly 23, 20268 min read

The One Big Beautiful Bill made 100% bonus depreciation permanent, but only for property acquired after January 19, 2025. Sign the contract a day early and you are capped at 40%. The date you committed to buy matters more than the date the asset shows up.

Large SUV parked on a winding forest road

A general contractor buys a $400,000 excavator in 2025 and expects to write the whole thing off, because that is what everyone told him the new law does. Whether he actually can depends on a date most people never think about: not when the machine was delivered, but when he signed the purchase contract. Sign it on January 10, 2025 and he deducts $160,000 in year one. Sign it on January 30 and he deducts the full $400,000. Same machine, same year, a $240,000 swing in the first-year deduction.

The rule

100% bonus depreciation is back, and this time it is permanent.

Bonus depreciation lets a business deduct a large share of an asset's cost in the first year instead of spreading it over the asset's normal recovery period. Under the 2017 Tax Cuts and Jobs Act, the 100% deduction was phasing out: 80% in 2023, 60% in 2024, and 40% in 2025, headed to zero by 2027. The One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025, stopped the slide and restored the deduction to a permanent 100%. Unlike the old version, there is no scheduled expiration this time. IRS Notice 2026-11 provides the interim guidance and confirms the agency is carrying over the familiar rules from the prior bonus regulations.

The property has to have a recovery period of 20 years or less, which covers most of what businesses actually buy: machinery, equipment, vehicles, computers, furniture, and qualified improvement property (interior improvements to nonresidential buildings). It does not cover the building itself. Bonus depreciation also has no dollar ceiling and no taxable-income limit, so it can push a business into a loss, which is a real difference from the alternative discussed below.

The cutoff

Why the January 19, 2025 acquisition date decides everything.

The statute ties 100% treatment to property "acquired" after January 19, 2025. Acquired does not mean delivered or paid for. Under the binding written contract rules the IRS carried into Notice 2026-11, the acquisition date is the date you entered into a binding written contract to buy the asset. If you signed a binding contract on or before January 19, 2025, the property is treated as acquired under the old law and stays on the phase-down, meaning 40% bonus for 2025, even if the machine is not delivered and placed in service until later that year. Self-constructed property is tested by when construction began.

There is a transition election for the awkward first year. For property placed in service in a tax year that includes January 19, 2025, you can elect to apply 40% bonus instead of 100% across the board (60% for certain long-production-period property and aircraft). That sounds backward, but it matters when you would rather not accelerate deductions into a low-income year and would prefer the write-offs later at a higher rate. The election is available, but for most profitable businesses taking the full 100% is the right call.

A $400,000 excavator (7-year property) bought two ways, placed in service 2025.

Cost of the equipment: $400,000
First-year deduction, contract signed Jan 10, 2025 (40% bonus): $160,000
First-year deduction, contract signed Jan 30, 2025 (100% bonus): $400,000
Extra first-year deduction from the later date: $240,000
Federal tax deferred at a 32% rate: $76,800

Illustrative, tax year 2025, assumed 32% marginal rate. Both machines are placed in service in 2025; only the contract date differs. Under the 40% path the remaining $240,000 is still recovered over the 7-year MACRS schedule, so the $76,800 is a timing benefit (a deferral of tax), not a permanent saving. Actual first-year MACRS on the remaining basis is not shown.

Used property and Section 179

Used equipment qualifies, and this is not the same as Section 179.

One of the most valuable features is that used property qualifies, as long as its original use did not begin with you, you did not previously use it, and you did not buy it from a related party. A used piece of equipment or a pre-owned heavy vehicle can be fully expensed the same as new. That single rule makes bonus depreciation the workhorse behind most cost segregation studies on real estate, where an engineering study reclassifies parts of a building into shorter-life property that bonus can then expense. It is the same engine behind the short-term rental depreciation strategy.

Bonus depreciation is often confused with Section 179 expensing, which is a separate election with a similar result but different limits. For 2026, Section 179 caps the deduction at $2,560,000 and starts phasing out once you place more than $4,090,000 of property in service, and it cannot create a loss because it is limited to business taxable income. Bonus depreciation has none of those caps. In practice I use Section 179 first for precision on specific assets, then let 100% bonus sweep up everything else, because bonus is all-or-nothing by asset class while Section 179 can be dialed to the exact dollar.

You can elect out of bonus depreciation, but the election is made by class of property under IRC §168(k)(7), so it applies to every asset in that class for the year and it is irrevocable. That is worth planning around when you have a net operating loss you do not want to deepen, or when accelerating deductions this year wastes them against income that is already low.