Depreciation Deduction: Section 179 & Bonus Depreciation in 2026

Both tools do the same headline thing — move a multi-year deduction into year one — and most side hustlers can use either. The differences only matter at the edges, but those edges decide which one you want.

When both apply, Section 179 is taken first and bonus depreciation sweeps up whatever basis is left. The order rarely changes the total, but it explains the one asymmetry worth remembering: Section 179 stops at your income. A freelancer with $9,000 of Schedule C profit who buys a $15,000 machine can only elect $9,000 under Section 179 — but bonus depreciation will take the full $15,000 and hand back a $6,000 loss that offsets other income.

One wrinkle helps side hustlers specifically: the Section 179 income limit counts all of your active business income, and wages you earn as an employee count toward it. If you have a W-2 job alongside the side hustle, the income ceiling is rarely what stops you.

Both deductions cover tangible property with a recovery period of 20 years or less, used more than 50% for business, and placed in service — actually ready and available for use — during the tax year. Buying a camera in December and leaving it in the box until March means the deduction belongs to the following year.

• Computers, cameras, phones, tools, machinery. The everyday case. Five- or seven-year property, fully expensed in year one.
• Office furniture and fixtures. Desks, chairs, shelving, the standing desk you finally bought.
• Off-the-shelf software.Purchased software qualifies for Section 179. Monthly SaaS subscriptions aren't depreciated at all — they're just an ordinary expense you deduct in full.
• Used equipment.Both deductions apply to used property, as long as it's new to youand you didn't buy it from a related party.
• Qualified improvement property — interior improvements to nonresidential buildings — plus roofs, HVAC, and alarm systems on those buildings, for Section 179.

What's outside: land (never depreciable), buildings themselves, inventory, and anything used 50% or less for business. Property you rent out as a landlord has its own rules — see the rental income tax guide for residential rental depreciation.

Before reaching for depreciation at all, check the price tag. The de minimis safe harborlets a business without audited financial statements simply expense any item costing $2,500 or less per invoice. Most of what a side hustler buys clears that bar, and expensing it as supplies avoids putting the asset on a depreciation schedule you'd otherwise track for five years.

Vehicles are listed property, and Congress assumed you'd enjoy driving them. Two consequences follow. First, business use must exceed 50% or you lose Section 179 and bonus entirely and depreciate straight-line instead. Second, the deduction depends on a number most people have never looked up: the gross vehicle weight rating on the driver's-door sticker.

For a passenger automobile the $20,300 is a ceiling on everything— Section 179, bonus, and regular MACRS depreciation added together — and it's prorated by business use. Buy a $40,000 sedan used 75% for business and your depreciable basis is $30,000, but your first-year deduction is capped at $15,225 (75% of $20,300). The remaining basis comes back over the following years, each one capped in turn: $19,800 in year two, $11,900 in year three, and $7,160 every year after.

Now run the heavy SUV. A $62,000 vehicle rated over 6,000 pounds GVWR, used 80% for business, has a depreciable basis of $49,600. Section 179 takes $32,000 of it; bonus depreciation takes the remaining $17,600. First-year deduction: the whole $49,600. This gap between a $15,225 sedan and a $49,600 SUV is the entire reason the "buy a G-Wagon" genre of tax advice exists.

Before you take it seriously: you still spent the money, the deduction is worth only your marginal rate, and if business use slips to 50% or below in a later year you recapture the excess as ordinary income. For most side hustlers the standard mileage rate on a cheap car beats depreciating an expensive one — and you can't do both, because the mileage rate already includes a depreciation component.

A freelance videographer with $40,000 of Schedule C profit and no W-2 job buys a $6,000 camera and lens, used entirely for client work, in November 2026. She sets it up the same week.

• Depreciable basis: $6,000.100% business use, placed in service in 2026 — the November purchase date doesn't prorate anything.
• First-year deduction: $6,000. Either Section 179 (her business income easily covers it) or 100% bonus depreciation. Same answer.
• Self-employment tax saved: about $848. The deduction cuts net profit, and 15.3% applies to 92.35% of it.
• Income tax saved: $720. After the standard deduction her taxable income sits in the 12% bracket, so $6,000 × 12%.

Total tax savings of roughly $1,570, meaning the $6,000 camera really cost her about $4,430. That last sentence is the one worth internalizing. A deduction is a discount, never a rebate — buying equipment you don't need to lower your tax bill leaves you poorer than paying the tax. Model your own numbers with the deduction estimator or the Schedule C calculator.

Expensing everything immediately is the default advice and it's usually right. Three situations where it isn't:

• Your income is unusually low this year. A deduction is worth your marginal rate. Absorbed at 12% it saves $120 per $1,000; the same deduction spread over five years of MACRS, landing in 24% years, saves $240. Electing out of bonus for a property class, or electing a smaller Section 179 amount, is how you shift it.
• You'd wipe out the QBI deduction. The 20% qualified business income deduction is computed on your net profit. Deducting profit to zero deletes the QBI deduction that profit would have generated, so the last dollars of a big write-off can be worth less than the first.
• Business use looks shaky.On a vehicle, if use drops to 50% or less before the recovery period ends, you recapture the excess depreciation as ordinary income on Form 4797. A deduction you have to give back at a higher rate later wasn't worth taking.

There's also the exit. When you sell a fully expensed asset, depreciation recapture under Section 1245 treats the proceeds as ordinary income up to the amount you depreciated — not capital gain. Selling the truck you wrote off is a taxable event, and people are routinely surprised by it.

1. Confirm it's in service.Ready and available for use in the business, in the tax year you're filing for.
2. Compute the business-use percentage and apply it to the purchase price. That product is your depreciable basis.
3. File Form 4562.Section 179 elections go in Part I; the bonus depreciation allowance goes on line 14; vehicles and other listed property go in Part V, where you'll report business mileage and confirm you have written records.
4. Carry the total to Schedule C line 13 ("Depreciation and section 179 expense deduction"), where it reduces net profit — and therefore both income tax and self-employment tax.
5. Keep the paperwork. The invoice, the date placed in service, and — for a vehicle — a contemporaneous mileage log. Listed property without records is the easiest deduction in the tax code to lose.

Because the write-off lands on Schedule C rather than as an adjustment to income, it shrinks the base for the 15.3% SE tax as well as your income tax. That's why equipment purchases are worth more to a self-employed person than to a W-2 employee, and why they belong on the same list as every other self-employed write-off.