Section 179 & Bonus Depreciation in 2026: How to Write Off Equipment and Save Thousands

If your Florida small business purchased — or is planning to purchase — equipment, machinery, vehicles, or software in 2026, you are sitting on one of the most powerful tax deductions available: the combination of Section 179 expensing and 100% bonus depreciation. Thanks to the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025, these two tools work together to let most businesses write off the entire cost of qualifying equipment in the same year they buy it — rather than spreading the deduction over five, seven, or more years under standard depreciation rules.

This guide explains exactly how both deductions work, what changed in 2026, which types of assets qualify, and — critically — how to use them strategically to maximize your tax savings. Whether you run a landscaping company in Tampa, a dental practice in Orlando, or a construction firm in Jacksonville, these rules were designed with businesses like yours in mind.

What Is Section 179 and How Does It Work?

Section 179 of the Internal Revenue Code allows businesses to deduct the full purchase price of qualifying equipment and software placed in service during the tax year, rather than depreciating it over its useful life. Think of it as an immediate "expensing" election — instead of writing off a $50,000 piece of machinery at $7,143 per year for seven years, you deduct the entire $50,000 in year one.

For the 2026 tax year, the Section 179 deduction limit was adjusted upward to $2,560,000 — a dramatic increase from the pre-OBBBA cap of $1,250,000. The phase-out threshold also rose significantly: the deduction begins phasing out dollar-for-dollar when total qualifying property placed in service exceeds $4,090,000, and is completely eliminated at $6,650,000. For the vast majority of Florida small and mid-size businesses, you will never come close to these limits.

One important rule: the Section 179 deduction cannot exceed your business's net taxable income. You cannot use Section 179 to create a loss. However, any unused Section 179 can be carried forward to future tax years.

What Is Bonus Depreciation and How Is It Different?

Bonus depreciation is a separate, first-year depreciation allowance that runs alongside Section 179. Under the OBBBA, 100% bonus depreciation is available for qualifying property acquired and placed in service after January 19, 2025. This was a major win for business owners — bonus depreciation had been phasing down in prior years (80% in 2023, 60% in 2024, 40% in early 2025), and the OBBBA restored it to the full 100%.

Unlike Section 179, bonus depreciation is not limited by your business's taxable income. This means bonus depreciation can create a net operating loss (NOL), which can then be carried forward to offset future taxable income. This makes bonus depreciation especially powerful for businesses with large capital investments or lower-profit years.

The IRS requires businesses to apply Section 179 first, then layer on bonus depreciation for any remaining depreciable basis. In practice, for most small business purchases, either tool alone will fully cover the cost — so the strategic choice comes down to the income limitation rules and your specific tax situation.

What Property Qualifies for Section 179 and Bonus Depreciation?

Both Section 179 and bonus depreciation apply to a wide range of business assets. Here is what qualifies:

Tangible personal property — Equipment, machinery, tools, furniture, and fixtures used in your business. This includes both new and used property (bonus depreciation applies to used property as long as it is new to you).

Business vehicles — Vehicles used for business purposes qualify, though heavy SUVs (over 6,000 lbs. gross vehicle weight) have their own Section 179 sublimit ($30,500 for 2026). Standard passenger vehicles are subject to luxury auto caps. Trucks and vans used exclusively for business with a gross vehicle weight over 6,000 lbs. are eligible for full deduction.

Off-the-shelf software — Purchased software (not custom-developed) placed in service during the year qualifies for immediate expensing under Section 179.

Qualified improvement property — Improvements to the interior of nonresidential real property (such as new flooring, HVAC upgrades, or lighting improvements in your commercial space) qualify for bonus depreciation.

What does NOT qualify: Land, inventory, property held for investment, and real property structures (buildings themselves) are excluded. Air conditioning and heating units are also ineligible for Section 179 (though they may qualify for bonus depreciation as qualified improvement property).

Section 179 vs. Bonus Depreciation: Which Should You Use?

Real-World Example: How This Works for a Florida Business

Let's say you own a plumbing company in Fort Lauderdale and in 2026 you purchase a new service van for $65,000 and $40,000 worth of specialized equipment — a total of $105,000 in qualifying property.

Under the old rules (pre-OBBBA, if bonus depreciation had continued phasing down), you might have only deducted 40% of that amount — about $42,000 — in year one, with the remainder spread over several years.

Under the 2026 rules, you can use Section 179 to deduct the full $105,000 in year one — assuming your business shows at least $105,000 of taxable income. If your net income is lower, say $80,000, you deduct $80,000 via Section 179 (limited by income) and use bonus depreciation for the remaining $25,000, potentially creating a small carryforward loss.

If you're in the 25% tax bracket, writing off $105,000 instead of $42,000 saves you roughly $15,750 in additional federal tax in year one alone. For Florida business owners, there's also no state income tax on individuals — but S-corps and C-corps still pay Florida's corporate income tax, making these deductions even more valuable on the state level.

The "Placed in Service" Deadline: Why It Matters

Both Section 179 and bonus depreciation require that the property be placed in service — meaning actually put to use in your business — during the tax year, not just purchased. Ordering equipment on December 30 and having it delivered in January means you get the deduction next year, not this year. If you need the deduction in 2026, make sure your equipment is operational before December 31, 2026.

For vehicles, placed in service means it was driven for business purposes. For equipment, it means it was set up and available for use — even if you haven't fully utilized it yet.

Your Section 179 & Bonus Depreciation Checklist for 2026

1. Make a list of all qualifying property purchased this year — Include equipment, vehicles, software, and any qualified improvement property (interior commercial space improvements). Note the date each was placed in service and the total cost.

2. Confirm "placed in service" dates before year-end — If you have pending equipment orders that haven't arrived or been set up, take action now. Equipment must be operational by December 31, 2026 to claim this year's deduction.

3. Calculate your estimated taxable income — Section 179 is limited to your net business income. Work with your accountant to project your 2026 income so you know how much Section 179 you can claim versus how much falls to bonus depreciation.

4. Verify vehicle weight and use percentages — For any business vehicles, check the gross vehicle weight rating (GVWR). Vehicles over 6,000 lbs. GVW qualify for larger deductions. Keep a mileage log to document the percentage of business vs. personal use — only the business-use portion qualifies.

5. File IRS Form 4562 — This is the required form for claiming both Section 179 and bonus depreciation. Your tax preparer will complete this, but knowing it exists helps you gather the right documentation: receipts, purchase agreements, dates placed in service, and asset descriptions.

6. Consider timing of future purchases — If you're planning a major equipment purchase in early 2027, ask your accountant whether accelerating it into December 2026 creates a meaningful tax benefit. Running the numbers before year-end gives you real leverage.

7. Keep all documentation — Maintain receipts, invoices, financing agreements, and records of when equipment was first used in the business. In the event of an IRS audit, this documentation is what supports your deduction. Store digital copies in your accounting system or cloud storage.

Don't Leave Money on the Table

The combination of Section 179 and 100% bonus depreciation is one of the most significant tax benefits available to small business owners right now — and it takes real planning to use it correctly. The rules around income limitations, vehicle categories, and "placed in service" timing can trip up even experienced business owners.

At Accounting BOSS, we help Florida small businesses make these decisions strategically — not just at tax time, but throughout the year. Whether you're buying a fleet of vehicles, upgrading your office, or investing in major equipment, we'll make sure you're capturing every dollar of deduction you're entitled to. Reach out to Accounting BOSS today to schedule a consultation and start maximizing your 2026 tax position.