Quick answer: Depreciation spreads the cost of business equipment, vehicles, and buildings over several years. Section 179 and bonus depreciation are two ways to deduct much or all of the cost of qualifying equipment in the year you place it in service instead. Federal law restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, but New York generally does not follow bonus depreciation, so your state deduction can look quite different.
Few topics generate more questions at our desk than depreciation, and for good reason. The rules have changed several times in the past decade, and the right answer depends on your income this year, your expected income next year, and the state you file in. Here is how the pieces fit together.
What depreciation actually is
When you buy something that will last more than a year, such as a truck, a machine, or a building, the tax code generally does not let you deduct the whole cost right away. Instead you recover it over a set number of years called a recovery period. Computers and vehicles are typically five-year property, most office furniture and equipment is seven-year, residential rental buildings are 27.5 years, and commercial buildings are 39 years.
Depreciation starts when the asset is placed in service, meaning ready and available for use, not when you order it or pay for it. A machine delivered on December 28 but not installed until January belongs to the next tax year. Land is never depreciated, which is why the allocation between land and building matters when you buy real estate.
Section 179: an election you control
Section 179 lets you choose to expense the cost of qualifying property, such as equipment, off-the-shelf software, certain vehicles, and some improvements to nonresidential buildings like roofs and HVAC, in the year it is placed in service. The 2025 federal tax law raised the annual dollar limit substantially, and the IRS adjusts it for inflation each year, so check the current figure on the IRS publication on depreciation before you plan around it.
Two features make Section 179 useful and also limit it:
- You choose it asset by asset. You can expense one machine and depreciate another normally.
- It cannot create a loss. The deduction is limited to your taxable business income. Any excess carries forward to future years.
Section 179 also has a phase-out once total equipment purchases in a year pass a certain level, which matters mostly for larger businesses.
Bonus depreciation: automatic unless you opt out
Bonus depreciation lets you deduct a percentage of the cost of qualifying new or used property in the first year. Under the 2017 tax law, that percentage had been stepping down each year. Legislation enacted in July 2025 restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, and made it permanent. Property acquired earlier under a binding contract may follow the older, lower percentage, so the acquisition date matters.
Unlike Section 179, bonus depreciation:
- Applies automatically unless you elect out, by class of property for the year.
- Can create or increase a net operating loss.
- Has no annual dollar cap.
Our own experience owning rental properties taught us that the flashiest deduction is not always the best one. Bonus depreciation does not apply to the residential building itself, though it can apply to certain shorter-lived components identified through a cost segregation study. If you own rentals, our article on depreciating a rental property and what happens when you sell covers that side.
Which one should you use?
There is no single right answer, but these questions usually settle it:
- Is your income unusually high this year? Accelerating deductions into a high-income year usually makes sense.
- Do you expect higher income or rates later? If so, regular depreciation may save more over time, because the deductions land in years when they are worth more.
- Do you want a loss? Bonus depreciation can create one; Section 179 cannot.
- Are you likely to sell the asset soon? Fast write-offs increase the gain taxed as ordinary income through depreciation recapture when you sell.
- What does New York do? See the next section.
For many small businesses, the practical answer is a mix: bonus depreciation on most assets, with Section 179 used selectively where the state treatment or the income limit makes it the better tool.
How New York treats depreciation
New York has decoupled from federal bonus depreciation for most taxpayers. That means if you take bonus depreciation on your federal return, you generally add it back on your New York return and claim depreciation for state purposes under the older rules instead. The result is two depreciation schedules, one federal and one New York, that need to be tracked for the life of each asset.
New York generally does follow federal Section 179, which is one reason we sometimes prefer it for Central New York businesses with steady income. The details are in the instructions for New York forms such as the IT-398 depreciation schedule, and this is an area where a careful preparer earns their fee. If you sell into or operate in other states, each one has its own conformity rules as well.
Frequently asked questions
Can I take Section 179 on a vehicle?
Often, yes, but vehicles have their own limits. Passenger cars and light trucks are subject to annual caps on depreciation, and certain heavier SUVs have a separate, lower Section 179 limit. Business use must be more than 50%, and you need a mileage log to prove it.
What happens if I sell equipment I already wrote off?
The gain, up to the amount of depreciation you took, is generally taxed as ordinary income under the recapture rules. If you deducted the full cost and later sell the equipment for half of what you paid, expect to report that half as income.
Can I change my mind after filing?
Section 179 elections can generally be revoked or changed on an amended return. Electing out of bonus depreciation is less flexible and is generally made on a timely filed return. Fixing a missed depreciation deduction in later years may require filing an accounting method change rather than an amendment.
Does used equipment qualify?
For bonus depreciation, used property can qualify if it is new to you and was not acquired from a related party. Section 179 also generally allows used property under similar conditions.
This article is general information for 2026, not tax or legal advice for your situation. Tax rules and figures change; confirm current amounts with the IRS, New York State, or your accountant before acting.
Related service: Business & Corporate Tax