Most small business owners I’ve talked to this summer are still making equipment decisions based on 60% bonus depreciation. That number isn’t just outdated. It’s from a different legal reality. The One Big Beautiful Bill Act changed everything, and if you haven’t recalibrated your thinking yet, you’re probably leaving a serious deduction on the table right now, in the middle of the 2026 tax year.

Here’s the part that genuinely surprised me when I went through the details: this isn’t a temporary patch or a one-year political compromise. The restoration of 100% bonus depreciation is permanent. The Section 179 limit didn’t just get bumped up a little. It was more than doubled, to $2,560,000. Both figures are now indexed for inflation. For small business owners who have spent years watching these rules erode, that’s a structural shift worth stopping and actually understanding.

What the Law Actually Changed, and When It Kicked In

The Tax Cuts and Jobs Act of 2017 gave us a great run of 100% bonus depreciation, then built in a phase-down schedule that most people forget was always going to happen. By 2024, the rate had dropped to 60%. For 2026, under the old rules, it would have been 40%. Some sources on the internet are still citing that 40% figure, which is a costly error for anyone relying on them right now.

The OBBBA reversed that phase-down and restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025. So if you’ve bought equipment this year, or you’re planning to before December 31, you’re operating under the restored rules. The IRS issued Notice 2026-11 in January 2026 to provide interim guidance on how practitioners and owners should apply those restored rules, and that’s the compliance reference your CPA should be working from.

On the Section 179 side, the pre-OBBBA limit was $1.25 million with a phase-out starting at around $3.13 million. According to Section179.org, the 2026 limit is now $2,560,000, with the phase-out threshold at $4,090,000, and both numbers will adjust for inflation going forward. For the vast majority of small businesses, those thresholds are essentially academic. You’re not going to hit the phase-out unless you’re having an exceptionally capital-intensive year.

How Stacking Actually Works

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This is where a lot of owners get confused, and I want to be direct about what stacking means in practice because the order matters.

Section 179 goes first. You elect it on a piece of equipment, and it reduces your taxable income by the purchase price of that asset, up to the deduction limit. Then, if there’s any remaining eligible basis on that equipment or on other qualifying property you didn’t elect Section 179 for, 100% bonus depreciation covers the rest. The result for most small businesses is a full first-year write-off on qualifying equipment purchases, regardless of whether you mix and match the two methods.

Why would you use Section 179 at all if bonus depreciation gets you to 100% anyway? Because they have different rules and different strategic uses. Section 179 is limited to your business’s taxable income for the year. It can’t create a loss. Bonus depreciation has no such restriction; it can push you into a net operating loss, which you can then carry forward. Depending on your income situation, one might serve you better than the other for a specific purchase. The Landmark CPAs breakdown of the OBBBA changes does a good job of laying out those distinctions for practitioners who want the technical layer.

The Used Equipment Point That Most People Miss

I’ll be honest, this one catches even experienced operators off guard. Bonus depreciation isn’t limited to new equipment. It applies to used equipment as long as the asset is new to you, the taxpayer. Used machinery, refurbished computers, second-hand commercial vehicles, pre-owned HVAC systems. All of it potentially qualifies.

For businesses that buy equipment through auctions, dealer resales, or from other companies, this is significant. You’re not penalized for buying smart. The deduction is the same whether you paid full retail for a new piece of equipment or negotiated a deal on something with 30,000 miles on it. The key question is always whether the asset qualifies as eligible property under the tax code and whether it was previously owned by you or a related party.

This is also where professional consultation matters. The rules around what qualifies, what doesn’t, and how vehicle deductions interact with luxury auto limits are genuinely complex. What I’m describing here is the framework. Your CPA applies it to your specific circumstances.

The Cash Flow Math That Makes This Urgent Right Now

ScenarioEquipment CostBonus Depreciation RateFirst-Year DeductionTax Savings (35% rate)
Old 2026 rules (40%)$150,00040%$60,000$21,000
Restored 100% rules$150,000100%$150,000$52,500
Difference--$90,000$31,500

I want to put some real numbers around this because the abstract concept of “a bigger deduction” doesn’t always land until you see what it means in practice.

Say you’re in the 35% combined federal and state effective tax rate bracket, and you buy $150,000 worth of qualifying equipment before December 31. Under the old 40% rule that would have applied in 2026, your first-year deduction would have been $60,000, saving you $21,000 in taxes. Under the restored 100% rules, your deduction is the full $150,000, saving you $52,500. That’s a $31,500 difference in actual cash, in the same tax year, on the same equipment purchase. The equipment didn’t change. The rules did.

For a business considering a $500,000 equipment investment, that gap gets much larger. And because the restoration is permanent, this isn’t a “buy now before the window closes” situation. But it does mean that any purchase you’ve been putting off because you weren’t sure the deduction was worth it deserves a fresh look with the current numbers.

As the Instead blog covering the OBBBA changes noted, the combination of restored bonus depreciation and the expanded Section 179 limit gives small businesses more first-year expensing flexibility than at any point since the TCJA first passed. That framing tracks with what I’m seeing in practice.

A Few Things to Watch Before You Assume You’re Covered

Not everything qualifies. Real property (your building, land improvements in some cases) doesn’t get bonus depreciation treatment. There are specific rules around listed property like vehicles, especially passenger cars, where the luxury auto caps still apply and can significantly limit your deduction. The rules for property used less than 50% for business are different. Software, certain qualified improvement property, and assets with longer depreciation lives all have their own treatment.

The research here is also still evolving in terms of how the IRS will handle certain edge cases under the restored rules. Notice 2026-11 provided guidance, but it’s interim guidance, not final regulations. That’s not a reason to avoid using these deductions. It’s a reason to work with someone who’s tracking the guidance as it develops.

The bottom line is this: if you’re making equipment decisions in the second half of 2026 based on rules from 2024 or earlier, you’re working with the wrong map. The permanent restoration of 100% bonus depreciation and the expanded Section 179 limit are real, they’re in effect now, and they represent a genuine planning opportunity that’s worth a conversation with your accountant before the year ends.

Sources

This article is for general informational purposes only and does not constitute financial, tax, or legal advice. Business finance and tax rules vary by entity type, state, and individual circumstances. Consult a qualified CPA, enrolled agent, or business attorney for advice specific to your situation.

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