Section 179 and Bonus Depreciation for Manufacturers: Equipment Purchases in 2026

Section 179 lets a business deduct the cost of qualifying tangible personal property in the year it is placed in service, up to the annual limit, instead of depreciating it over time. For tax year 2026 the limit is $2,560,000, and the deduction phases out dollar for dollar once qualifying purchases exceed $4,090,000.

Section 179 applies to new and used equipment, and the deduction cannot create or increase a loss for the business, which matters for how much a given purchase can actually deduct.

Bonus depreciation allows an immediate deduction for a percentage of qualified property cost. The One Big Beautiful Bill Act of 2025 restored 100 percent bonus depreciation for qualified property acquired and placed in service after January 19, 2025, reversing the prior phase-down that would have reduced it to 40 percent in 2025 and 20 percent in 2026.

Property placed in service between January 1 and January 19, 2025 generally receives 40 percent bonus depreciation, so the placed-in-service date matters for the deduction available.

The two work together: a manufacturer can apply Section 179 first, then bonus depreciation on the remaining basis, which is how a qualifying equipment purchase can be fully deducted in year one. Limitations apply at the entity level, such as pass-through rules for S corporations and partnerships, and state treatment can differ from federal.

The interaction is worth modeling before the purchase, because the same machine can produce different deductions depending on the entity, the year and the other purchases in that year.

Timing is the first decision: when the equipment is placed in service, not when it is ordered or paid for, generally determines the year of the deduction. Financing structure, trade-ins and the mix of new and used property all affect the math.

For a facility purchase or major build-out, cost segregation can accelerate depreciation on production-specific components of the building itself, which pairs with the equipment rules. A coordinated plan, equipment plus facility, is where the full benefit sits.