Tax Strategy: Understanding the Remaining Bonus Depreciation Rules

Tax Strategy: Understanding the Remaining Bonus Depreciation Rules

For businesses making large capital investments in Heavy Equipment Leasing or loans, Bonus Depreciation remains one of the most powerful tax incentives available. However, unlike Section 179 which has permanent limits, the rules governing Bonus Depreciation have been subject to ongoing legislative changes, making expert tax planning a necessity for any major purchase in 2026.

The 2026 Bonus Depreciation Rule

Under current law, Bonus Depreciation is scheduled to phase down annually. In 2026, the available Bonus Depreciation is set at 20% for qualifying property placed in service during the calendar year. This means you can immediately deduct 20% of the asset’s purchase price, and then depreciate the remaining 80% under standard MACRS rules.

Bonus Depreciation vs. Section 179: A Critical Distinction

While both are immediate deductions, they serve different strategic purposes. Internal NLCG Analysis confirms that understanding the interplay is vital for maximizing tax savings.

• Annual Limit: Section 179 has a dollar limit, while Bonus Depreciation has No Annual Dollar Limit.
• Income Limit: Section 179 cannot create a net loss. Bonus Depreciation Can Create a Net Loss that can be carried forward to offset future income.

Timing and Eligibility Requirements

To claim the 20% Bonus Depreciation in 2026, the equipment must be placed in service during the 2026 calendar year (i.e., installed, tested, and ready for use). The deduction is generally available for both new and used equipment.

Because of the complexity and the potential for changes, always refer to the definitive source for tax matters: Additional First Year Depreciation Deduction (Bonus) - FAQ