How to Choose: Section 179 vs. Bonus Depreciation
Making the right choice for 2025 and beyond under the new OBBB Act provisions.
The real crux now isn't new vs. used (both qualify for §179 and bonus post-TCJA/OBBBA), it's recapture mechanics and state conformity. You also need to pay attention to the rules around assets acquired before January 20, 2025 as they are only eligible for 40% bonus depreciation, so if you have any of those, §179 with 100% deduction may well be the correct choice.
Under the One Big Beautiful Bill Act (OBBBA):
- 100% bonus under §168(k) is permanently restored for most tangible property (≤20-year MACRS) acquired and placed in service after Jan. 19, 2025, including used property that meets the normal acquisition rules.
- §179 limits are increased (roughly to $2.5M with a $4M phase-out starting point for years beginning after 12/31/2024, indexed thereafter).
So for new or used equipment, you generally can choose between:
- 100% bonus (no income limit), or
- §179 expensing up to the higher post-OBBBA cap (subject to taxable income + phase-out).
2. New vs. used equipment – now basically a non-issue
For equipment (machinery, computers, furniture, etc.):
New or used, purchased for business, not from a disqualified related party/carryover transaction.
New or used, recovery period ≤20 years, acquired after 1/19/25 under a qualifying "purchase" (no disqualifying related-party / carryover rules).
So the "used doesn't qualify for bonus" distinction is gone in practice. The choice is almost entirely about:
1. Recapture profile, and
2. Federal vs. state timing and conformity.
3. Federal recapture at disposition – §179 vs bonus
From a federal standpoint, on an eventual sale of equipment at a gain:
- Both §179 and bonus are simply depreciation for purposes of §1245 recapture.
- All allowed or allowable depreciation (including §179 + bonus + regular MACRS) is recaptured as ordinary income to the extent of gain.
- So strictly at sale, there is no fundamental federal recapture advantage of bonus vs §179 for typical equipment.
If total depreciation taken is the same, the §1245 recapture base is the same. Where they do diverge is recapture timing and triggers before sale, particularly if business use drops.
4. Recapture when business use drops below 50%
§179 – more sensitive
If business use of §179 property drops to 50% or less during the recovery period, you must recompute depreciation as if §179 had not been claimed and recapture the excess as ordinary income in that year. That recapture shows up on Form 4797 and basis is increased by the recapture amount.
So §179 can create an earlier "gotcha" if the client's use profile isn't stable.
Bonus – usually no mid-life recapture
Bonus is also depreciation, and will be recaptured at disposition under §1245, same as 179. But generally, a drop in business use below 50% does not trigger an immediate bonus recapture in the same way §179 does; recapture effectively waits until the property is sold or otherwise disposed of.
Bonus is "smoother": you'll still get §1245 recapture at sale, but less likely to get blindsided by an interim 179(d)(10) event.
5. State tax (SALT) – why §179 sometimes wins
This is where §179 can be strategically better even when bonus is available.
Many states decouple from §168(k), but not from §179:
- A significant number of states (e.g., Illinois, New Hampshire, New York) decouple from federal bonus depreciation and require an addback of bonus for state purposes, followed by slower state-specific depreciation.
- Those same states often conform more closely to §179, sometimes with their own caps but still allowing immediate expensing at the state level.
- Some states might even allow bonus depreciation on the federal return and §179 deductions to be taken on the state return.
Result:
- Taking federal bonus may give you 100% up front federally, but the state will add most or all of it back.
- Electing §179 instead of bonus can give you immediate expensing both federally and at the state level (within the state's §179 limit), improving state-current ETR and simplifying book-tax/state tracking.
It is important to check the regulations at each affected state for changes from this guide as the regulations can be updated retroactively too.
Check your state's conformity here
1. Need to drive federal taxable income low / create NOLs?
Favor bonus (no income limit, permanent 100% post-OBBBA).
2. Client is in a state that limits or adds back bonus, but allows decent §179?
Consider §179 first up to the point where:
- You get federal expensing, and
- You avoid or minimize state addbacks,
- Then decide if any remaining basis should go to bonus or regular MACRS.
3. High risk of business-use dropping below 50%?
Be wary of §179 because of the immediate recapture rules on use dropping below 50%.
Bonus may be safer: no special mid-stream recapture; you'll simply have §1245 recapture at sale.
4. Need granular control over which assets you expense vs. spread?
Use §179 for fine-tuning (asset-by-asset),
Then layer bonus (by class) where you're comfortable with blanket acceleration.
One-liner you can use with clients:
"Now that both bonus and §179 work for new and used equipment, the real difference isn't what qualifies – it's how each behaves for recapture and in your key states. Bonus is the federal sledgehammer with recapture mostly at sale; §179 is the scalpel that can trigger earlier recapture if business use drops, but often gives better or cleaner results in states that don't like bonus."
Use our updated 2025 calculator to estimate your tax savings under the new OBBB Act limits.
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