Business Depreciation Calculator
Calculate your tax deduction using Section 179, bonus depreciation, and MACRS schedules.
Asset Details
Year 1 Deduction
| Section 179 deduction | $50,000 |
| Total year 1 | $50,000 |
Method Comparison
| Method | Year 1 | Total |
|---|---|---|
| Straight-line only | $3,572 | $50,000 |
| MACRS (no Sec 179/Bonus) | $10,000 | $50,000 |
| Sec 179 + MACRS | $50,000 | $50,000 |
| Sec 179 + Bonus + MACRS | $50,000 | $50,000 |
Key Considerations
- 1.Section 179: $50,000 deducted immediately in year 1
- 2.Section 179 requires the asset to be used more than 50% for business
- 3.Bonus depreciation is phasing down: 60% (2024), 40% (2025), 20% (2026), 0% (2027) — act sooner to maximize
Based on 2026 IRS depreciation rules. Actual deductions may vary based on specific circumstances. Consult a tax professional for guidance.
Understanding Business Depreciation
When you buy equipment, vehicles, or other assets for your business, you can't deduct the full cost in the year of purchase (with some exceptions). Instead, the cost is spread over the asset's useful life through depreciation. However, Section 179 and bonus depreciation let you front-load deductions — sometimes deducting the entire cost in year one. The 2026 bonus depreciation rate is 20%, down from 100% in 2022, continuing its phaseout.
2026 Depreciation Methods at a Glance
| Method | 2026 Limit | Eligible Assets | Key Rule |
|---|---|---|---|
| Section 179 | $1,250,000 | Equipment, vehicles, software, furniture | Must be profitable; phaseout at $3.13M |
| Bonus depreciation | 20% of cost | New and used property (not buildings) | No income limit; generates losses |
| MACRS | Full cost over recovery period | All depreciable property | 3, 5, 7, 15, 27.5, or 39 years |
| Straight-line | Full cost over recovery period | All depreciable property | Equal annual deductions |
MACRS Recovery Periods
| Asset Type | Recovery Period | Examples |
|---|---|---|
| 3-year property | 3 years | Racehorses, qualified rent-to-own property |
| 5-year property | 5 years | Computers, vehicles, office equipment |
| 7-year property | 7 years | Office furniture, machinery, appliances |
| 15-year property | 15 years | Land improvements, qualified improvement property |
| 27.5-year property | 27.5 years | Residential rental buildings |
| 39-year property | 39 years | Commercial buildings |
Bonus Depreciation Phaseout Schedule
| Tax Year | Bonus Rate | Deduction on $100K Asset |
|---|---|---|
| 2022 | 100% | $100,000 |
| 2023 | 80% | $80,000 |
| 2024 | 60% | $60,000 |
| 2025 | 40% | $40,000 |
| 2026 | 20% | $20,000 |
| 2027+ | 0% | $0 |
Frequently Asked Questions
Can I use Section 179 and bonus depreciation together?
Yes. Section 179 is applied first, then bonus depreciation applies to the remaining cost. For a $50,000 piece of equipment, you could deduct $50,000 via Section 179 (if under the limit), or $50,000 via Section 179 for the first portion and 20% bonus on the rest. The optimal combination depends on your income level and asset cost.
What are the vehicle depreciation limits?
Passenger vehicles (under 6,000 lbs GVWR) have annual depreciation caps: Year 1 is $20,400 (with bonus depreciation) or $12,400 (without), Year 2 is $19,800, Year 3 is $11,900, and subsequent years are $7,160. SUVs and trucks over 6,000 lbs GVWR can use Section 179 up to $28,900 plus bonus depreciation — making heavy vehicles more tax-advantageous.
See also: Home Office Deduction Calculator and Self-Employment Tax Calculator.