Bonus Depreciation Calculator 2026 — 40% Phase-Out Schedule
Calculate bonus depreciation for assets placed in service in 2024–2028. Apply Section 179 first, then 40% (2026) bonus depreciation on remainder. Buy-now vs wait comparison.
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2026 limit: $1,220,000. Applied before bonus depreciation. %
Federal + state combined rate $
Section 179 cannot exceed business taxable income Asset cost:
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Total Year 1 Deduction
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Year 1 Tax Savings
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Bonus Depreciation Amount
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Remaining for MACRS
Depreciation Calculation Breakdown
Bonus Depreciation Guide 2026
Bonus depreciation is one of the most powerful tax planning tools for businesses acquiring equipment, vehicles, technology, or making improvements. The 40% rate in 2026 means you can deduct 40% of the asset cost immediately, with the remaining 60% depreciated over the normal MACRS life.
Calculation Order
Step 1: Apply Section 179 (up to $1,220,000, limited to business income)
Step 2: Calculate bonus depreciation on remaining basis
Bonus = (Asset Cost − Section 179) × Bonus Rate
Step 3: Regular MACRS depreciation on remaining basis
MACRS Year 1 = (Remaining after bonus) × MACRS Year 1 Rate
Total Year 1 = Section 179 + Bonus + MACRS Year 1
Step 2: Calculate bonus depreciation on remaining basis
Bonus = (Asset Cost − Section 179) × Bonus Rate
Step 3: Regular MACRS depreciation on remaining basis
MACRS Year 1 = (Remaining after bonus) × MACRS Year 1 Rate
Total Year 1 = Section 179 + Bonus + MACRS Year 1
Example — $500,000 asset, 7-year, 2026, no Section 179
Bonus depreciation (40%): $500,000 × 40% = $200,000
Remaining basis: $300,000
Year 1 MACRS (7-year, 14.29% half-year): $300,000 × 14.29% = $42,870
Total Year 1 deduction: $242,870
Without bonus: $500,000 × 14.29% = $71,450
Tax savings (35%): ($242,870 − $71,450) × 35% = $59,997
Remaining basis: $300,000
Year 1 MACRS (7-year, 14.29% half-year): $300,000 × 14.29% = $42,870
Total Year 1 deduction: $242,870
Without bonus: $500,000 × 14.29% = $71,450
Tax savings (35%): ($242,870 − $71,450) × 35% = $59,997
Extended
Buy Now vs Wait Analysis (2026 vs 2027 vs 2028)
Compare total first-year deductions if you purchase the asset in 2026, 2027, or 2028
Compare the total first-year deduction if you purchase the asset in 2026, 2027, or 2028 as bonus depreciation phases out. Also shows the net present value impact of delaying.
| Year | Bonus Rate | Section 179 | Bonus Dep. | MACRS Yr1 | Total Yr1 | Tax Savings |
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Frequently Asked Questions
What is bonus depreciation and what is the rate in 2026?
Bonus depreciation (Section 168(k)) allows businesses to immediately deduct a percentage of the cost of qualifying new or used assets in the year placed in service, rather than depreciating them over several years. The 2026 bonus depreciation rate is 40% (OBBBA extended the 2024/2026 60% rate, and 2026 steps down to 40%). Qualifying assets include 5-year, 7-year, 15-year, and 20-year MACRS property. Real property (39-year commercial buildings) does NOT qualify for bonus depreciation unless specifically identified through cost segregation.
What is the bonus depreciation phase-out schedule?
The current phase-out schedule: 2022: 100% (TCJA); 2023: 80%; 2024: 60% (OBBBA extended); 2026: 60% (OBBBA maintained); 2026: 40%; 2027: 20%; 2028 and beyond: 0%. After 2027, businesses can no longer use bonus depreciation and must fully depreciate assets over their MACRS lives. The OBBBA (One Big Beautiful Bill Act) extended the 60% rate through 2026, preventing the scheduled drop from 80% to 60% in 2024 as originally planned.
What is Section 179 and how does it interact with bonus depreciation?
Section 179 allows businesses to expense (deduct in full) the cost of qualifying business assets up to $1,220,000 in 2026 (indexed). Section 179 is applied FIRST to reduce the asset cost, then bonus depreciation applies to the remaining basis. Key differences: Section 179 cannot create a net operating loss (limited to business income), while bonus depreciation can. Section 179 is a choice (can be applied selectively per asset), while bonus depreciation applies to all qualifying assets unless you opt out. For assets below $1.22M, Section 179 can achieve full immediate expensing even when bonus depreciation is below 100%.
What types of property qualify for bonus depreciation?
Qualifying property must have a MACRS recovery period of 20 years or less: 5-year (computers, vehicles, equipment), 7-year (office furniture, machinery), 15-year (land improvements, qualified improvement property), and 20-year (certain farm buildings). Used property now qualifies (post-TCJA) as long as it is "new to the taxpayer" — you cannot have previously owned or used the asset. Real property (27.5-year residential rental or 39-year commercial) does NOT directly qualify, but components identified in a cost segregation study as 5/7/15-year property do qualify.
Should I take maximum bonus depreciation or spread it out?
Maximum front-loading makes sense when: you have high taxable income now and expect lower income in future years; you are in a high marginal bracket now; you have NOLs to use (bonus can increase them); you need cash flow from the tax savings. Spreading out depreciation may be better when: you expect income to grow significantly (higher future tax rate); you are in the lowest bracket now; you have passive loss limitations; your state does not conform to federal bonus depreciation (CA, NJ, NY partially conform). Always model the net present value of the timing difference.