What's the Difference Between Section 179 and Bonus Depreciation?

Section 179 and bonus depreciation are both ways for businesses to immediately deduct the cost of equipment and other assets rather than spreading the deduction over several years. Section 179 lets you elect to expense up to $1,220,000 of qualifying property in 2024, but the deduction is limited to your business's taxable income — you can't use it to create or increase a loss. Bonus depreciation has no income limitation, so it can generate a net operating loss that you carry forward to future years. Bonus depreciation rates have been phasing down — it was 80% in 2023 and drops to 60% in 2024 — while Section 179 limits have been rising with inflation. Many businesses use Section 179 first to avoid the income limitation issue, then apply bonus depreciation to any remaining qualifying costs.