Is Equipment Depreciation Tax Deductible?

Three ways to deduct equipment

1. Regular depreciation (MACRS): Spread the cost over the asset's useful life. Computers and office equipment: 5 years. Office furniture: 7 years. This is the default method.

2. Section 179: Deduct the full purchase price in the year you buy it, up to $2,500,000 (2026 limit, increased by the One Big Beautiful Bill Act from $1,000,000). The equipment must be used more than 50% for business. Phase-out begins at $4,000,000 in total equipment purchases.

3. Bonus depreciation: Deduct 100% of the cost in year one. The OBBBA permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. No income limit like Section 179.

What counts as equipment?

• Computers, laptops, monitors
• Printers, scanners, copiers
• Office furniture (desks, chairs, shelving)
• Cameras and photography/video equipment
• Tools and machinery
• Vehicles (with limitations)
• Point-of-sale systems
• Kitchen equipment (restaurants)
• Manufacturing equipment

When NOT to use Section 179

Section 179 isn't always the best choice:

• Low-income year: Section 179 can't create a business loss. If your income is low, you might not be able to use the full deduction. Bonus depreciation CAN create a loss, making it the better choice in low-income years.
• Expecting higher income next year: Spreading depreciation might save more in taxes if your income (and tax bracket) will be higher in future years.
• Over the limit: If you buy more than $4,000,000 in equipment (2026), Section 179 begins to phase out. But 100% bonus depreciation has no such limit.