Buy a laptop, a camera, office furniture, or a work vehicle for your business, and the IRS normally makes you spread the deduction out over several years through depreciation. Section 179 and bonus depreciation are the two rules that let you skip the wait and deduct most or all of the cost in the year you bought it. They work differently, and picking the right one — or the right combination — can meaningfully change your tax bill.
The default: depreciation over time
Without either provision, a $3,000 camera used for your photography business would normally be deducted a little at a time over its "useful life" — five or seven years, depending on the asset class. That is fine for planning purposes, but it means the deduction trickles in slowly instead of offsetting the year you actually spent the money.
Section 179: expense it now, up to a limit
Section 179 lets you elect to deduct the full purchase price of qualifying equipment, software, and certain vehicles in the year you place them in service, instead of depreciating them over time. It applies to tangible personal property used more than 50% for business — computers, tools, machinery, office furniture, and some vehicles.
Two limits matter. First, there is an annual dollar cap on how much you can expense, which is adjusted for inflation and can change year to year — always check the current-year limit before planning a large purchase. Second, and more important for many freelancers, Section 179 cannot create or increase a loss. If your business only nets $8,000 in profit this year, you cannot use Section 179 to deduct $20,000 of equipment and post a loss — the deduction is capped at your business income, with any excess carried forward.
Bonus depreciation: no profit limit, no election needed for most assets
Bonus depreciation, by contrast, lets you deduct a percentage (often 100%, depending on current law and the placed-in-service date) of the cost of qualifying new or used property — and unlike Section 179, it can push your business into a loss that offsets other income on your return. There is generally no dollar cap on the total amount of bonus depreciation you can claim.
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Can exceed business profit and create a loss | No | Often yes |
| Annual dollar cap | Yes (indexed, verify current year) | Generally no cap |
| Election required | Yes, asset-by-asset | Applies automatically unless you elect out |
| Works on vehicles with the luxury auto limits | Subject to vehicle caps | Subject to vehicle caps |
How freelancers usually apply both
In practice, many self-employed taxpayers use Section 179 first — up to the amount that keeps their business profitable on paper — and let bonus depreciation absorb whatever is left, or handle assets that would otherwise phase out of Section 179 eligibility. A tax software program or preparer will typically run this optimization automatically, but knowing the order helps you understand why a $5,000 equipment purchase might show up as three different deduction amounts in draft versions of your return.
Business-use percentage still applies
Both provisions only apply to the business-use portion of an asset. A laptop used 80% for freelance work and 20% for personal browsing can only have 80% of its cost expensed under either method — and if business use ever drops below the ongoing-use thresholds required to keep the deduction, you may face "recapture," meaning some of the deduction gets added back as income in a later year.
Recordkeeping to protect the deduction
- Keep the purchase receipt or invoice showing the date placed in service.
- Track business-use percentage with a log if the asset also has personal use (this is especially scrutinized for vehicles).
- Note which method — Section 179, bonus depreciation, or standard depreciation — was used for each asset, since that determines what happens if you sell it early.
Frequently asked questions
Can I use Section 179 and bonus depreciation on the same purchase?
You generally cannot apply both to the same dollar of cost, but a single tax return can use Section 179 for some assets and bonus depreciation for others, and any amount above the Section 179 limit on one asset can often flow into bonus depreciation.
Does buying used equipment still qualify?
Yes, both Section 179 and current bonus depreciation rules generally allow used property, as long as it is new to your business and meets the other eligibility requirements.
What happens if I sell the equipment a year later?
Selling an asset shortly after fully expensing it can trigger depreciation recapture, meaning part of the gain (or the original deduction) is taxed as ordinary income. Keep records of the deduction method used so this is calculated correctly.