Section 179 vs Bonus Depreciation: The 2025 Playbook

Sep 11

You want the write-off. You also want control. In 2025, the rules changed in your favor, but only if you actually understand them and use them with intent. I’m going to walk you through how Section 179 and bonus depreciation work now, what really changed this year, the traps that trip up owners, and the exact steps to make the right call for your business.

I’ll keep this conversational, blunt, and useful. If we were sitting across the table, this is exactly how I’d say it.

What changed for 2025

Two huge shifts matter for your tax planning:

1) 100 percent bonus depreciation is back.
Under the One Big Beautiful Bill Act (H.R. 1), businesses can generally take 100 percent bonus depreciation again on qualified property acquired after January 19, 2025 and placed in service under the rules of §168(k). There’s a transitional election that lets you use a reduced rate (40 percent for most property, 60 percent for certain long-production-period property) for your first tax year ending after January 19, 2025 if full expensing would overshoot your target. Congress.gov

2) Section 179 limits got bigger.
For tax years beginning after December 31, 2024, Section 179’s dollar limit increased to $2,500,000, with the phase-out starting at $4,000,000 of 179-eligible purchases. That expansion gives you more room to surgically expense assets without creating a loss. Congress.gov

Bottom line: you now have a powerful blunt instrument (100 percent bonus) and a bigger surgical tool (Section 179). Use them intentionally, not randomly.

Quick definitions that actually matter

Section 179 expensing
You elect to expense specific assets up to an annual dollar limit. You can’t use it to create or increase a tax loss. Unused amounts carry forward. You pick the assets, one by one.

Bonus depreciation
This is automatic unless you elect out. It’s now 100 percent for qualified property acquired after Jan 19, 2025. Unlike 179, bonus can create a loss, which can be good or bad depending on your goals. There’s a 2025 transitional election to lower it for one year if you need to manage income optics. Congress.gov

Placed in service really matters
Ordering is not enough. The asset must be ready and available for use by year-end to count for that year. IRS Publication 946 is your rulebook for “placed in service,” listed property, and depreciation mechanics. IRS

Head-to-head: when to use which

Use Section 179 when…

You want asset-by-asset control over what you expense this year.
You want to avoid creating a loss while still getting a big deduction.
Your state decouples from bonus but conforms to 179, so the state result is better with 179. (Many states do not follow federal bonus depreciation; check your state’s conformity.) CohnReznick Tax Foundation Grant Thornton

Use 100% bonus when…

You want the maximum deduction now, and a loss this year is acceptable or strategic.
You bought a lot and don’t want to manage 179 asset by asset.
You acquired the property after Jan 19, 2025 and want immediate expensing. Congress.gov

Use the transitional election when…

You need a reduced first-year percentage (40 percent or 60 percent for certain plants/long-production property) for the tax year ending after Jan 19, 2025 to keep lenders or partners comfortable, then return to 100 percent in later years. Congress.gov

Vehicles, SUVs, and the famous “caps”

Here’s the reality:

Heavy SUVs and trucks (gross vehicle weight rating over 6,000 lbs) can qualify for large write-offs. Section 179 has a special SUV cap that is indexed annually. For 2025, the SUV cost limit for 179 expensing is $31,300; passenger auto “luxury” limits still apply to standard cars. Bonus interacts with those caps too. Plan purchases with these ceilings in mind. RSM US
Passenger autos are subject to annual dollar limits no matter what. If you want a large first-year deduction, choose the vehicle strategically and document business use properly (think mileage logs and who/what/where/why for trips). Publication 946 and the Form 4562 instructions detail the limits and records required. IRS+1

Real estate improvements and specialty assets

Qualified improvement property (QIP) on nonresidential buildings continues to be eligible for bonus depreciation if it meets §168(k) rules, and can also be considered for 179 in some cases. Coordinate timing, contractor milestones, and “placed in service” dates so the deduction hits the year you want it. For large projects, watch written binding contract dates because acquisition date rules determine whether you’re in the 100 percent regime. Congress.gov

The state tax landmine

Many states decouple from federal bonus depreciation or apply their own adjustments. Plenty of states follow 179 more closely than bonus. If you operate in multiple states, run two projections: federal plus each state’s version. What looks perfect federally can be ugly at the state level if you ignore conformity. Tax Foundation Grant Thornton

Translation: Before you slam the 100 percent button, check your state. If your state adds back bonus, 179 might be the better lever.

Five planning scenarios you’ll recognize

Scenario 1: You’re an S-corp owner with a banner year.
You acquired $450,000 of equipment in August 2025. Cash is strong, and lenders don’t care about a book loss. You want maximum tax relief now.
Move: Take 100 percent bonus on all eligible assets acquired after Jan 19, 2025. Use 179 only where bonus doesn’t apply. Confirm state conformity so you aren’t blindsided at the state level. Congress.gov Tax Foundation

Scenario 2: Profitable, but you want to avoid a loss.
You need deductions, but you don’t want to report negative taxable income this year.
Move: Lead with Section 179 up to your business income limit, then depreciate the rest. If you still need more but do not want a full 100 percent write-off in 2025, consider the transitional reduced-rate election for that first tax year ending after Jan 19, 2025. Congress.gov

Scenario 3: Multi-state e-commerce brand.
Your home state conforms to 179 but adds back bonus.
Move: Favor 179 for the assets you can, and forecast state add-backs if you still take bonus federally. This is where a state-by-state projection pays for itself. Grant Thornton

Scenario 4: You’re renovating a leased office.
Your build-out qualifies as QIP, but milestones straddle year-end.
Move: Watch placed-in-service timing, and your binding contract date. If you cross Jan 19, 2025 on acquisition, you may open the door to 100 percent bonus if you can place it in service timely. Coordinate with the GC in writing. Congress.gov

Scenario 5: You need lender optics.
Your bank covenants don’t love big swings in taxable income.
Move: Use 179 for precision. Or take the transitional 40 percent or 60 percent in 2025, then go back to 100 percent later. Get that plan in an email thread with your CPA and banker so everyone stays aligned. Congress.gov

The decision framework I use with owners

Can you use a loss this year? If yes, bonus is the simplest path. If no, use 179 to the income limit, and remember the 2025 reduced-rate election if you need to dial back the first-year hit. Congress.gov
Do you need granular control by asset? That screams 179.
What does your state do? If your state adds back bonus, 179 may beat bonus even if federal loves bonus. Tax Foundation
Any vehicle purchases? Know the SUV cap and passenger auto ceilings before you buy, not after. RSM US
Acquisition date and contracts. For 100 percent bonus under the new law, watch the acquired-after-Jan-19, 2025 rule and the written binding contract test. Do not assume “we ordered it” is enough. Congress.gov

Documentation that protects you

Invoices, acceptance, delivery, and install records that prove placed-in-service by year-end.
Written binding contracts with dates that clearly show when you became obligated to buy the asset. That date can determine whether 100 percent applies. Congress.gov
Mileage logs and trip notes for vehicles, plus GVWR photos for heavy SUVs and trucks.
Asset listings with descriptions, cost, class life, location, and date placed in service.
Election statements for 179 and any election out of bonus or election for reduced bonus in 2025. Keep the PDFs with your return package.

Your eight-step implementation plan

Step 1: Inventory the assets you bought or will buy.
List item, cost, vendor, expected delivery, expected placed-in-service date, and whether it’s new or used. Add a column for “acquired after Jan 19, 2025” so you can see which ones qualify for 100 percent bonus under the new law. Congress.gov

Step 2: Tag state exposure early.
Mark which states you operate in. For each, note whether they conform to 179 and whether they decouple from bonus. If you do business in multiple states, give this list to your CPA before you decide. Tax Foundation

Step 3: Decide the “control level” you need.
If you need precision at the asset level, lean 179. If you just want maximum deduction and can take a loss, lean bonus.

Step 4: Model a reduced 2025 rate if needed.
If full expensing in 2025 blows up your target income, consider the one-year reduced-rate election for the tax year ending after Jan 19, 2025: 40 percent for most property, 60 percent for certain long-production assets. Plan now, not in March. Congress.gov

Step 5: For vehicles, verify the caps before you buy.
Heavy SUV or truck over 6,000 lbs? Great, but remember the SUV cap for 179 is $31,300 for 2025. Passenger autos have their own annual ceilings. Confirm specs and run the numbers before you sign. RSM US

Step 6: Lock your “placed in service” timeline.
Coordinate installs and deliveries so assets are truly usable by year-end. Put that target in writing with vendors. Publication 946 spells out what counts. IRS

Step 7: Prep your elections and statements.
Tell your CPA which assets you want under 179, which classes you want to elect out of bonus (if any), and whether you’re using the 2025 reduced-rate election. Get it documented.

Step 8: Keep a tidy binder.
Digital is fine. Store contracts, invoices, delivery slips, photos, GVWR proof, install notes, and all elections together. When someone asks later, you can prove everything in five minutes.

Common mistakes I want you to avoid

Counting an order as “placed in service.” It must be ready for use. Period. IRS
Forgetting the acquisition date rule. If you locked in a written binding contract before Jan 19, 2025, different percentages can apply. Congress.gov
Ignoring state decoupling. The federal win can become a state tax headache. Check conformity or ask your CPA to run a state projection. Grant Thornton
Overlooking vehicle caps. Heavy SUV does not mean unlimited first-year write-off. Passenger autos have strict ceilings. RSM US
Letting the tax tail wag the dog. Do not buy an asset you do not need just to chase a deduction. Buy what advances the business.

Owner-level cash and optics

Think like a CFO. Lenders, partners, and your future self care about consistency. If swinging to a loss creates problems, use 179 for control or the reduced-rate election in the 2025 transition year to keep the story smooth. Next year, with 100 percent permanent, you can always hit the gas. Congress.gov

The one-page cheat sheet

If you want maximum now: 100 percent bonus for qualified property acquired after Jan 19, 2025 and placed in service this year. Congress.gov
If you want precision: Use Section 179 up to income, asset by asset. New limits: $2.5M, phase-out starts $4M. Congress.gov
If you need to dial back 2025: Consider the one-year reduced rate (40 or 60 percent) for the tax year ending after Jan 19, 2025. Congress.gov
If you operate across states: Check state conformity; many decouple from bonus. Tax Foundation
If you’re buying vehicles: Know the 2025 SUV cap and the passenger auto limits before you buy. RSM US
Always: Document “placed in service,” keep contracts, and prepare elections. IRS

Action steps for small business owners

List every 2025 asset you bought or plan to buy, with cost, acquisition date, and expected placed-in-service date. Circle assets acquired after Jan 19, 2025. Congress.gov
Run a two-way projection: 179-first versus 100 percent bonus, including state effects. Pick the path that fits tax and optics. Tax Foundation
Decide on the 2025 reduced-rate election now if you need to manage income, not in March. Put it in writing with your CPA. Congress.gov
For any vehicle, confirm GVWR and whether the SUV 179 cap applies, then check the passenger auto limits if relevant. RSM US
Lock installation dates with vendors so assets are placed in service before year-end if you want the deduction this year. IRS
Prepare elections: which assets you’re expensing under 179, which classes you’re electing out of bonus, and whether you’re using the transitional reduced-rate election. Congress.gov
Build a documentation folder with contracts, invoices, delivery tickets, photos, and election statements.
Review state conformity annually; states change. If your footprint grows, redo the projection. Tax Foundation

Resources

IRS Publication 946: How to Depreciate Property (placed-in-service rules, listed property, 179 and bonus mechanics). IRS
Congress.gov — H.R. 1, One Big Beautiful Bill Act (Public Law 119-21) (100 percent bonus and 179 limit provisions; transitional election). Congress.gov+1

The Bottom Line

Section 179 and bonus depreciation are not rivals. They are tools. In 2025 you have more horsepower than last year. Use bonus when you want speed and can live with a loss. Use 179 when you want control by asset and need to manage lenders or state-tax differences. Keep your eye on placed-in-service dates, SUV caps, and QIP classifications. Then execute the plan you wrote down today.

Want the math done with your numbers, your state, and your lender covenants? Book a Black Mammoth Power Hour. We will run the projection, set your elections, and lock your 2025 plan in one working session.

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