Equipment placed in service after January 19, 2025 qualifies for a 100% first-year bonus depreciation write-off under federal tax law, and Section 179 expensing separately covers up to $2,500,000 of qualifying purchases for the 2025 tax year, rising to $2,560,000 in 2026, per the IRS's Publication 946. Both figures phase out above a set purchase total, and the two provisions work differently enough that mixing them up on a return costs real money.
What changed, and when did it take effect?
The reconciliation law that restored 100% bonus depreciation — Public Law 119-21 — was enacted July 4, 2025, according to the bill text posted on govinfo.gov. IRS Publication 946 applies the restored 100% allowance to qualified property acquired and placed in service after January 19, 2025. Property acquired before that date, and placed in service during 2025, still falls under the prior phase-down schedule: a 40% special depreciation allowance for qualified property acquired after September 27, 2017.
The distinction matters for equipment ordered under the old contract terms but delivered late. Acquisition date and placed-in-service date are both tracked by the IRS, and a machine bought on paper before January 20, 2025 but not running in the field until later in the year can land on either side of the line depending on how the purchase was structured. That's a fact pattern for a preparer to confirm against the invoice and delivery record, not something to guess at from the sales brochure.
How much can Section 179 expense in 2025 and 2026?
Section 179 lets a business expense the full cost of qualifying property in the year it's placed in service, up to an annual dollar cap, instead of depreciating it over several years. The cap and its phase-out threshold both rise for 2026, per IRS Publication 946.
| Tax year | Section 179 maximum | Phase-out begins at | SUV/heavy-vehicle limit |
|---|---|---|---|
| 2025 | $2,500,000 | $4,000,000 | $31,300 |
| 2026 | $2,560,000 | $4,090,000 | $32,000 |
The phase-out is dollar-for-dollar: every dollar of qualifying purchases above the threshold reduces the maximum deduction by the same amount. An operation that places $4,500,000 of Section 179 property in service in 2025 — $500,000 over the $4,000,000 threshold — sees its available deduction cut by $500,000, per the same IRS publication.
What farm property actually qualifies?
Farm-specific guidance sits in IRS Publication 225, the Farmer's Tax Guide. Eligible Section 179 property for a farm business includes tangible personal property used in the operation, grain bins, single-purpose agricultural structures, and qualified real property improvements to farm buildings. General-purpose farm buildings and land itself are not Section 179 property under this framework.
Publication 225 also confirms the same restoration date for the 100% bonus allowance — property acquired and placed in service after January 19, 2025 — and adds a separate category: qualified production property placed in service after July 4, 2025 through December 31, 2030 also qualifies for a 100% allowance. That category is aimed at nonresidential real property used in production activity, which can reach on-farm processing or storage construction depending on how the structure is used; it's a narrower and more fact-specific test than ordinary machinery purchases.
Publication 946 adds a construction-start test on top of the placed-in-service date for that production-property category: the qualifying structure's construction has to have begun after January 19, 2025, in addition to being placed in service after July 4, 2025. A grain-handling or processing building that broke ground earlier in 2025, before the law's cutoff, would not qualify for the 100% allowance under this specific category even if it opens for use well within the window — a distinction that turns on paperwork from the construction contract, not the ribbon-cutting date.
Section 179 or bonus depreciation — what's the practical difference?
Both provisions can zero out the tax basis of new equipment in its first year, but they're built differently. Section 179 is capped at a set dollar amount per year, phases out once total qualifying purchases cross the threshold, and is limited to the business's taxable income for the year — it can't be used to create a loss. Bonus depreciation, at the restored 100% rate, carries no annual dollar cap and no income limitation; it can push a return into a loss that can offset other income or, subject to separate rules, carry forward.
That gap is why the ordering matters on a real return: a preparer typically applies Section 179 first, up to the income limit, then applies bonus depreciation to the remaining basis. An operation with a large purchase and modest taxable income for the year may get more value leaning on bonus depreciation rather than Section 179, precisely because Section 179 stops at taxable income and bonus depreciation doesn't.
Both provisions are elections, not automatic entries. Section 179 is claimed on Form 4562, and Publication 946 describes "two different taxable income limits" that determine how much of the deduction is usable in the current year, with disallowed amounts carrying over to future years. Bonus depreciation runs the opposite way: the 100% rate applies by default to qualifying property, and a business that wants the lower 40% rate instead — sometimes useful for smoothing income across years — has to affirmatively elect out, per the same publication.
There's also a recapture risk on the back end. Publication 946 requires recapturing part of a Section 179 or bonus deduction if a piece of equipment's business use drops enough in a later year, which is a real consideration for machinery that shifts to significant personal or custom-work use after the purchase year. The exact recapture calculation depends on the asset's remaining depreciable basis and is not something to estimate without running the numbers.
What should an operator confirm before year-end?
None of this is a substitute for a preparer who has the actual invoices, delivery dates, and income projection in hand — Farm Press Theme is not offering tax advice, only laying out what the IRS's own publications say the rules are. Three things worth confirming with a preparer before closing the books: the acquisition and placed-in-service dates on any large 2025 purchase, whether Section 179 or bonus depreciation gets more value against this year's income, and whether any structure or storage investment might qualify as production property under the 2030 window described in Publication 225.
