United States: Why Wait To Deduct Your Purchases? Turbocharge Tax Deductions With Bonus Depreciation And Sec. 179

"Don't put off until tomorrow what you can do today," Benjamin Franklin once advised. This timeless wisdom applies in many business scenarios, from taking advantage of growth opportunities to claiming tax deductions.

In general, business owners should jump on tax-saving opportunities as soon as possible due to the time value of money. Two especially lucrative breaks for capital-intensive manufacturers under the Tax Cuts and Jobs Act (TCJA) are the expanded first-year bonus depreciation deduction and the first-year Section 179 deduction. Both allow you to accelerate deductions for qualifying purchases of property, plant and equipment. Here is what you should know.

First-year bonus depreciation deduction

Businesses can deduct 100% of the cost of certain assets in the first year they are placed in service under the new-and-improved bonus depreciation program. This federal tax break applies to qualifying new and used assets placed in service between September 28, 2017 and December 31, 2022. After that, the bonus depreciation percentage is reduced by 20% per year as follows:

  • 80% for property placed in service in 2023;
  • 60% for property placed in service in 2024;
  • 40% for property placed in service in 2025; and
  • 20% for property placed in service in 2026.

Bonus depreciation is fully phased out after 2026, unless the program is extended by Congress. (Note: These deadlines are extended by one year for certain assets with longer production periods and for aircraft.)

Most categories of tangible depreciable assets, other than real estate, qualify for this break. Congress also intended for qualified real estate improvement property (QIP) placed in service after 2017 to be eligible for bonus depreciation. QIP includes qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property. However, due to a drafting error, QIP placed in service after 2017 still has a 39-year Modified Accelerated Cost Recovery System (MACRS) recovery period, as under prior law. Therefore, QIP is ineligible for bonus depreciation, unless Congress passes a technical correction that makes bonus depreciation available.

Sec. 179 deduction

Alternatively, your business can elect to expense the cost of any Sec. 179 property and deduct it in the year the property is placed in service. The TCJA expanded the Sec. 179 deduction for qualifying assets placed in service in tax years beginning in 2018 and beyond. The maximum Sec. 179 deduction is $1.02 million for 2019 (up from $1 million for 2018, thanks to the annual inflation adjustment).

The TCJA also expanded the definition of qualifying assets for Sec. 179 deductions to include:

  • Depreciable tangible personal property used mainly in the furnishing of lodging (such as furniture and appliances);
  • QIP (except improvements to enlarge a building, elevators or escalators and the internal structural framework of a building); and
  • Roofs, HVAC equipment, fire protection systems and alarm and security systems for nonresidential real property.

There is an important caveat to remember: The Sec. 179 deduction is phased out for larger businesses. The deduction starts to be phased out if your qualified asset purchases for the year exceed $2.55 million for 2019 (up from $2.5 million for 2018). Sec. 179 limits and phaseouts are adjusted annually for inflation.

Sec. 179 expensing is limited to taxable income from a taxpayer's active trades or businesses. That means that Sec. 179 deductions cannot create or increase an overall tax loss for the business. Any amount that cannot be deducted currently because of the taxable income limit can be carried forward to later years until it is fully deducted.

Which is right for you?

When both 100% first-year bonus depreciation and the Sec. 179 deduction privilege are available for the same asset, you generally should claim 100% bonus depreciation because there are no limitations on that break.

However, in some situations, Sec. 179 expensing can be advantageous. For example, it can be used to fine-tune annual deductions, does not cause uniform capitalization (UNICAP) problems and covers certain improvements to nonresidential real property that are not eligible for bonus depreciation. The availability of the two deductions provides greater flexibility than just bonus depreciation alone.

Weigh your options

A tax professional can discuss whether bonus depreciation, Sec. 179 expensing, regular MACRS depreciation or a combination of these methods makes the most sense for your business. There is no right answer for everyone, but the TCJA provides a lot of flexibility in deducting purchases of property, plant and equipment.

Sidebar: Depreciation for business vehicles

The Tax Cuts and Jobs Act (TCJA) expands the first-year tax breaks for qualifying business vehicles. Specifically, new and used passenger vehicles placed in service after December 31, 2017, and used over 50% for business, may be eligible for the following maximum annual depreciation deductions:

  • $10,000 for 2018 (or $18,000 if you claim first-year bonus depreciation);
  • $16,000 for 2019;
  • $9,600 for 2020; and
  • $5,760 for 2021, and thereafter until the vehicle is fully depreciated.

These allowances will be indexed for inflation for 2019 and beyond. For tax purposes, heavy SUVs, pickup trucks and vans are treated as transportation equipment. That means they qualify for 100% first year bonus depreciation. To qualify, heavy vehicles must have a manufacturer's gross vehicle weight rating (GVWR) above 6,000 pounds, and they must be used over 50% for business purposes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Ostrow Reisin Berk & Abrams
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Ostrow Reisin Berk & Abrams
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions