Section 179 & Bonus Depreciation: How to Write Off 100% of Equipment in Year One
Tax Tips / Business Write-offs
Section 179 & Bonus Depreciation: How to Write Off 100% of Equipment in Year One
💡 Executive Summary
- Instant Deduction: Standard depreciation takes 5+ years. Section 179 allows you to expense 100% of the cost in the purchase year (up to ~$1.2M cap).
- The 6,000 lb Rule: Vehicles over 6,000 lbs (GVWR) bypass strict “luxury auto” limits, qualifying for full write-offs.
- Deadline: Equipment must be purchased and placed in service by December 31st. Delivery delays kill the deduction.
⚠️ THE “PROFIT” LIMITATION
Section 179 cannot create a tax loss; it can only reduce your business income to $0. If you want to create a Net Operating Loss (NOL) to offset future years, you must use Bonus Depreciation instead.
Section 179 cannot create a tax loss; it can only reduce your business income to $0. If you want to create a Net Operating Loss (NOL) to offset future years, you must use Bonus Depreciation instead.
For business owners, reinvesting is the ultimate tax shelter. The IRS incentivizes growth via Section 179 and Bonus Depreciation. Instead of waiting years to recover your investment, you slash your tax bill immediately, keeping cash flow in the business.
🧐 Heavy Vehicle Strategy (IRC § 280F)
Under 6,000 lbs: Subject to strict annual caps (e.g., ~$20k/year).
Over 6,000 lbs (GVWR): Classified as “Heavy Equipment.” Often eligible for 100% Bonus Depreciation or Section 179 expensing (Work Trucks, SUVs).
Under 6,000 lbs: Subject to strict annual caps (e.g., ~$20k/year).
Over 6,000 lbs (GVWR): Classified as “Heavy Equipment.” Often eligible for 100% Bonus Depreciation or Section 179 expensing (Work Trucks, SUVs).
Deduction Timing Simulation
YEAR 1 DEDUCTION ($100K ASSET)
Standard Depreciation (MACRS 5-Year)
$20,000 Off
Slow
Section 179 / Bonus Depr.
$100,000 Off
Instant
Strategy Comparison Matrix
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Deduction Limit | ~$1.2M Cap | No Cap |
| Profit Rule | Cannot exceed income | Can create Tax Loss (NOL) |
| Flexibility | Asset-by-Asset choice | All or Nothing (Class-based) |
“Do not buy equipment just for the deduction; buy it because your business needs it to grow. The tax break is the cherry, not the sundae.”
🔗 Strategic Connections (Internal)
🛡️ Combine With: QBI Deduction Guide 🏢 Real Estate: Cost Segregation Strategy 📉 Personal: Managing Investment Taxes🏛️ Institutional Verification (External)
📜 Legal Text: IRC § 179 (Election to Expense) 🏛️ IRS Official: Pub 946 (How to Depreciate Property) 📝 Form: 4562 (Depreciation and Amortization)
BMT designs for tax reality, not theory.