Section 179 & Bonus Depreciation for 2026
For most small businesses, Section 179 and bonus depreciation are how equipment purchases actually reduce taxes. Here's the state of both for 2026 and how they interact.
Section 179 basics
Lets you expense the full cost of qualifying equipment in the year placed in service, instead of depreciating over 5–7 years.
2026 dollar limit: approximately $1.22M (indexed annually).
Phase-out begins when total equipment purchases exceed roughly $3.05M.
Cannot create a loss — Section 179 is limited to your business taxable income.
Bonus depreciation basics
Applies automatically to qualifying property unless you elect out.
Phase-down schedule: 60% in 2024, 40% in 2025, 20% in 2026, 0% in 2027 (barring legislation).
Can create or increase a loss (unlike Section 179).
Note: legislation extending or restoring 100% bonus has been discussed repeatedly — check current status before a large purchase.
Which one to use
Small businesses under the Section 179 income limit generally prefer Section 179 — it's more selective (asset-by-asset).
For very large purchases or when you want to create a loss, bonus depreciation applies automatically for the portion above the Section 179 limit.
Vehicles have separate limitation rules (the 'luxury auto' caps) unless GVW exceeds 6,000 lbs.
Common mistakes
Buying equipment in December but not placing it in service until January — no deduction until placed in service.
Forgetting Montana conforms to federal depreciation but has its own rules for some assets.
Using Section 179 to create a loss (not allowed) instead of bonus depreciation (allowed).
Vehicles specifically
Passenger vehicles under 6,000 lbs GVW: capped first-year deduction around $20,000 (2024 with bonus).
Trucks, vans, and SUVs over 6,000 lbs GVW: full Section 179 up to $30,500 (2025), plus bonus on the remainder.
Vehicles over 14,000 lbs GVW: no limit — full Section 179.
A quick disclaimer
This article is general information for Montana small business owners, not tax, legal, or accounting advice for your specific situation. Rules change, and how they apply depends on facts we don't know about you. Before acting on anything you read here, talk to a qualified professional. If you're a Montana business owner and want a real conversation about your books, payroll, or tax, that's what Marlow Accounting is here for — call 406-290-1214 or schedule a discovery call.