Section 179 vs bonus depreciation

If what you bought cost under $2,500 an item, the de minimis safe harbor deducts it outright and neither of the other two is needed. irs.gov

That covers most of what a solo operator buys — laptops, monitors, cameras, chairs, phones — and it is the simplest of the three routes by a wide margin. Almost every article comparing Section 179 against bonus depreciation is written for a business buying machinery, and answers a question this audience does not have.

The three routes, shortest first

De minimis safe harbor. An annual election, applied per invoice or per item, up to $2,500 for a taxpayer with no applicable financial statement. irs.gov The item is deducted rather than capitalised, so it never enters a depreciation schedule and never has to leave one.

Section 179. An election to expense the cost of qualifying property. The ceiling for 2026 is $2,560,000, reduced above $4,090,000 of property placed in service. irs.gov Neither number will ever bind anyone reading this. The one that does is below.

Bonus depreciation. A first-year allowance under section 168(k), currently 100% for qualifying property. irs.gov No dollar ceiling and no election needed to take it — it applies by default, and you elect out of it.

The difference that actually decides between them

Section 179 cannot create or increase a loss. It is limited to taxable income from the business, and the disallowed part carries forward as a Section 179 deduction to a later year. irs.gov Bonus depreciation has no such limit and can produce a net operating loss.

For a sole proprietor in a genuinely thin year, the Section 179 limitation is usually the friendlier outcome, because a loss is worth very little to somebody who already owes almost no income tax — which is the next point.

What the deduction is worth, and the surprise at low income

Equipment is a Schedule C expense, so unlike health insurance and retirement contributions it does reduce self-employment tax.

Net profit	As a business expense	As a Schedule 1 adjustment	The adjustment is worth
$8,000	$423.88	$0.00	0%
$40,000	$691.53	$288.00	42%
$60,000	$691.53	$288.00	42%
$100,000	$914.58	$528.00	58%
$150,000	$914.59	$528.00	58%

At $100,000 of profit that is $914.58 on $3,000, about 30 cents on the dollar — roughly 1.7 times what the same money would return as an above-the-line adjustment.

The row that matters most is the top one. At $8,000 of profit the deduction returns about 14%, and every cent of it is self-employment tax: the standard deduction has already reduced income tax to zero, so there is nothing left for the deduction to reach. A business deduction at low income is purely a self-employment-tax play, and accelerating one into a year like that is the worst timing available.

When each is the right answer

Use the safe harbor for anything under the per-item threshold. It is an election you make on the return, it needs a written policy at the start of the year, and it keeps the item off the depreciation schedule entirely — which also keeps it out of the recapture rules below.

Use bonus depreciation for larger purchases in a normal year, or when you deliberately want the loss.

Use Section 179 when you want to expense some of an asset and depreciate the rest, which bonus cannot do, or when a state does not conform to bonus depreciation — several do not, and the state consequence can outweigh the federal convenience.

The rule that catches people, and it is not a dollar limit

Listed property — the category that includes vehicles — requires more than 50% business use to be expensed or depreciated this way. irs.gov If business use later falls below half, previously claimed depreciation is recaptured and added back to income in the year it drops.

That is the mechanism behind the recurring story of somebody who expensed a vehicle and then owed tax on it two years later. It is not a penalty and it is not an audit — it is the rule working exactly as written, applied to a use pattern that changed.

Anything that could plausibly be personal, especially a vehicle, is worth a preparer’s time before the election rather than after the recapture.

The honest summary

The comparison this page is named for is not the decision most readers are facing. The decision is usually “do I need to think about depreciation at all”, and for a laptop, a phone or a desk the answer is no.

Where it becomes real is a vehicle, and there the deciding factor is not which of the three routes you pick — it is whether the business-use share will still be above half in three years.