Business Asset Depreciation Calculator
Businesses can depreciate tangible property (equipment, vehicles, machinery, furniture) using three methods: Section 179 expensing allows immediate write-off of up to dollar 2,560,000 in 2026 (with phase-out starting at dollar 4,090,000); bonus depreciation provides a permanent 100% first-year deduction for qualified property acquired after January 19, 2025 under the One Big Beautiful Bill Act (OBBBA), with an elective 40% or 60% option; and MACRS (Modified Accelerated Cost Recovery System) depreciates property over its recovery class life (5-year, 7-year, 15-year, 27.5-year for residential, or 39-year for commercial real estate). Section 179 is applied first, then bonus depreciation to remaining basis, then MACRS. The calculator shows year-by-year depreciation schedules, applies the half-year convention, and estimates tax savings at your marginal rate. Depreciation reduces both ordinary income tax and, for sole proprietors, self-employment tax. Property classes and MACRS percentages are from IRS Publication 946.
A $50,000 asset (7-year property, 2026) can be expensed $50,000.00 in year 1 using Section 179, or depreciated over 8 years using MACRS. With 100% bonus depreciation applied to any remaining basis, year-1 deduction is $50,000.00.
Year-by-year depreciation schedule
| Year | Section 179 | Bonus Depr. | MACRS | Total Deduction | Remaining Basis |
|---|---|---|---|---|---|
| Calculating... | |||||
Depreciation methods explained
Section 179 expensing (2026 limit: $2,560,000)
Section 179 is the most straightforward way to deduct the full cost of a qualifying asset in the year it is placed in service. The 2026 deduction limit is $2,560,000, set by the One Big Beautiful Bill Act (OBBBA) and set by IRS Rev. Proc. 2025-32 (section 4.24). The phase-out begins dollar-for-dollar when total qualifying property placed in service during the year exceeds $4,090,000, eliminating the deduction entirely at $6,650,000 of property. Section 179 cannot exceed the business's net taxable income; any disallowed amount carries forward.
Bonus depreciation (100%, permanent under OBBBA)
IRC Section 168(k) bonus depreciation applies automatically to qualified property unless the taxpayer elects out. Under the OBBBA, the first-year deduction is a permanent 100% of cost for qualified property acquired after January 19, 2025, with an elective 40% or 60% option. This supersedes the old TCJA phase-down (40% in 2025, 20% in 2026, 0% in 2027). Unlike Section 179, bonus depreciation can create a net operating loss (NOL). Bonus depreciation is applied after Section 179 to the remaining depreciable basis. See the IRS One Big Beautiful Bill provisions page.
MACRS recovery periods and rates
After Section 179 and bonus depreciation are applied, the remaining basis is recovered over the MACRS recovery period using the applicable method and convention. For 5-year and 7-year property, the 200% declining balance method is used with the half-year convention, switching to straight-line when that produces a larger deduction. Residential rental property (27.5-year) and commercial real estate (39-year) use straight-line depreciation.
MACRS rates reference (IRS Publication 946, Table A-1)
| Year | 5-year | 7-year | 15-year |
|---|---|---|---|
| 1 | 20.00% | 14.29% | 5.00% |
| 2 | 32.00% | 24.49% | 9.50% |
| 3 | 19.20% | 17.49% | 8.55% |
| 4 | 11.52% | 12.49% | 7.70% |
| 5 | 11.52% | 8.93% | 6.93% |
| 6 | 5.76% | 8.92% | 6.23% |
| 7 | 8.93% | 5.90% | |
| 8 | 4.46% | 5.90% | |
| 9-16 | 5.90-2.95% |
Source: IRS Publication 946, Table A-1. 27.5-year and 39-year property use straight-line; rates depend on the month placed in service.
The 2025 rule change that rewrote first-year write-offs
The headline number on this page is a moving target for a reason. For years, first-year bonus depreciation was scheduled to disappear: the 2017 Tax Cuts and Jobs Act phased it down to 40 percent for 2025 and would have cut it to 20 percent in 2026 and to zero in 2027. The One Big Beautiful Bill Act reversed that, restoring a permanent 100 percent write-off for qualified property acquired after January 19, 2025. If you modeled an equipment purchase last year on the assumption that bonus depreciation was dying, the math has changed and it is worth rerunning.
The trap most owners fall into is treating Section 179 and bonus depreciation as interchangeable. They are not. Section 179 cannot create a loss: the deduction is capped at the business's taxable income, and anything above that carries forward. Bonus depreciation has no such ceiling and can push you into a net operating loss, which is often the whole point in a heavy investment year. The calculator applies Section 179 first, then bonus depreciation to whatever basis remains, then MACRS to the rest.
One caveat the federal figures hide: many states do not conform. A long list of states decouple from bonus depreciation and cap or disallow it, so a 100 percent federal deduction can still be spread over years on your state return. Before you bank the full first-year saving, check how your state treats bonus, because the $2,560,000 Section 179 ceiling and the federal 100 percent rule both stop at the state line.
Depreciation: frequently asked questions
What is Section 179 expensing and how does it differ from regular depreciation?
Section 179 (IRC Section 179) allows businesses to deduct the full cost of qualifying property in the year it is placed in service, rather than depreciating it over multiple years. For 2026, the limit is $2,560,000 with a phase-out beginning when total property placed in service exceeds $4,090,000. Section 179 cannot create a net loss; the deduction is limited to the business's taxable income. Qualifying property includes most tangible personal property (equipment, machinery, vehicles, furniture) and some qualified improvement property.
What is bonus depreciation and what percentage applies in 2026?
Bonus depreciation (IRC Section 168(k)) allows an additional first-year depreciation deduction on qualified property. The One Big Beautiful Bill Act (OBBBA) made the deduction a permanent 100% of cost for qualified property acquired after January 19, 2025, with an elective 40% or 60% option. This supersedes the old TCJA phase-down, which would have allowed only 20% in 2026 and 0% in 2027. Unlike Section 179, bonus depreciation can create or increase a net loss, and it applies automatically unless the taxpayer elects out.
What is MACRS and which property class applies to my asset?
MACRS (Modified Accelerated Cost Recovery System) is the depreciation system required for most property placed in service after 1986. Property is assigned to a recovery class: 3-year (small tools, some tractors), 5-year (computers, cars, office equipment, light trucks), 7-year (furniture, fixtures, most machinery), 15-year (land improvements, fencing, roads), 27.5-year (residential rental property, straight-line), and 39-year (commercial real estate, straight-line). The applicable percentages are published in IRS Publication 946 Tables A-1 through A-10.
What is the half-year convention?
Under the MACRS general depreciation system, assets are generally assumed to be placed in service at the midpoint of the year (the half-year convention), regardless of the actual date. This means the first year's deduction is half what it would otherwise be, and a full recovery year is added at the end of the recovery period. There is also a mid-quarter convention that applies if more than 40% of all personal property placed in service during the year is placed in service in the final quarter.
Can I use Section 179 and bonus depreciation on the same asset?
Yes. Section 179 is applied first, reducing the asset's basis. Bonus depreciation is then applied to any remaining basis. MACRS applies to whatever basis remains after both Section 179 and bonus depreciation. For most assets below the Section 179 limit, using Section 179 alone achieves full first-year expensing, making bonus depreciation redundant for that asset.
Does depreciation reduce self-employment tax?
Yes. Depreciation deducted on Schedule C reduces net self-employment income, which in turn reduces both income tax and self-employment tax. For a sole proprietor in the 22% income tax bracket and 15.3% SE tax bracket, each additional dollar of depreciation saves approximately 29 to 37 cents in combined taxes, depending on income level.
Official sources
- MACRS methods and rates: IRS Publication 946, How to Depreciate Property.
- Section 179 dollar limits for 2026 ($2,560,000 deduction, $4,090,000 phase-out): IRS Rev. Proc. 2025-32 (section 4.24).
- Bonus depreciation (OBBBA permanent 100%; Section 168(k) guidance in Notice 2026-11): IRS, One Big Beautiful Bill provisions.
- Form 4562 (depreciation and amortization): IRS Form 4562.
Reviewed by the CalculatorHub team, edited by James Graham, 11 July 2026. See our methodology. General information only, not tax advice. Consult a qualified tax professional for your specific situation.