Part 5: Section 179 & Bonus Depreciation — The Fastest Way to Write Off Business Equipment

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Section 179 & Bonus Depreciation — The Fastest Way to Write Off Business Equipment (2025)

Home businesses often need equipment, computers, tools, or furniture to operate.
Thankfully, the IRS offers two powerful tools to deduct the full cost fast:
Section 179 and Bonus Depreciation.
Under the 2025 rules, Bonus Depreciation has returned to 100%, making this one of the most valuable deductions for small business owners.



1️⃣ Section 179 vs. Bonus Depreciation — What’s the Difference?

Chapter 5 explains that both methods let you deduct the cost of qualifying property,
but the rules and limits are very different. :contentReference[oaicite:1]{index=1}

  • Section 179 — elective, limited, must have business income
  • Bonus Depreciation — automatic (unless opted out), no income limit, 100% in 2025

Quick Summary
• Section 179 gives you control
• Bonus Depreciation gives you speed (100% deduction)

2️⃣ Section 179 Rules for 2025

Key rules from Chapter 5 for home businesses:

  • ✔️ Must use the property >50% for business
  • ✔️ You can deduct up to the annual IRS limit
  • ✔️ Deduction cannot exceed business income
  • ✔️ Excess can be carried forward
  • ✔️ Applies to equipment, computers, furniture, certain vehicles

2025 IRS Limits (per the course outline):

  • 📌 Section 179 deduction limit: $1,220,000
  • 📌 Phase-out begins at: $3,050,000

(Exact numeric limits sourced from the 2025 tax law projections used in the course.)

💡 Example — Section 179 Income Limit
Your home business has $40,000 of net income.
You buy a $60,000 piece of equipment.

✔️ You can deduct up to $40,000 using Section 179
✔️ The remaining $20,000 carries forward

3️⃣ Bonus Depreciation — 100% Write-Off Returns

The course notes that Bonus Depreciation was scheduled to phase out after 2022,
but OBBBA (2025 tax law update) restores Bonus Depreciation to 100%. :contentReference[oaicite:2]{index=2}

  • ✔️ 100% first-year write-off
  • ✔️ No income limitation
  • ✔️ Applies to new and used property
  • ✔️ Remaining basis = $0

Bonus Depreciation is extremely valuable for home businesses that purchase equipment
but do not have enough income to use Section 179.

💡 Example — Bonus Depreciation No Income Limit
You earn only $10,000 this year but purchase $30,000 of equipment.

✔️ Section 179 would limit you to $10,000
✔️ Bonus Depreciation allows full $30,000 deduction

4️⃣ Special Rules for Listed Property (Vehicles, Electronics)

Chapter 5 has an entire section on “listed property” — property requiring strict documentation. :contentReference[oaicite:3]{index=3}

  • 📌 Vehicles (SUVs, trucks, passenger autos)
  • 📌 Computers
  • 📌 Cameras and video equipment
  • 📌 Smartphones & tablets

Requirements:

  • ✔️ Must be used >50% for business
  • ✔️ Must maintain mileage logs or usage logs
  • ✔️ If business use drops below 50% → depreciation recapture applies

Vehicle Rules Example
Luxury auto limits may cap the Section 179 deduction unless the vehicle qualifies as a heavy SUV (>6,000 lbs).

5️⃣ Which One Should You Use?

The course provides a comparison chart showing that Section 179 and Bonus Depreciation both have strategic advantages. :contentReference[oaicite:4]{index=4}

✔️ Choose Section 179 If:
• You want to limit the deduction to match income
• You want to preserve loss carryforwards
• You need control and flexibility

✔️ Choose Bonus Depreciation If:
• You want a full deduction regardless of income
• You purchased used property
• You want the fastest write-off possible

6️⃣ Examples Based on 2025 Rules

💡 Example 1 — Computer Equipment
You buy a $2,000 laptop for your business.

✔️ Section 179 → full deduction (if >50% business use)
✔️ Bonus Depreciation → full deduction automatically

💡 Example 2 — Home Studio Equipment
A content creator buys $12,000 of lighting, cameras, and audio gear.

✔️ Bonus Depreciation gives full $12,000 deduction in 2025
✔️ No income limit

💡 Example 3 — Recapture Risk
A photographer uses a $5,000 camera 80% for business in Year 1
but only 30% in Year 2.

✔️ IRS requires depreciation recapture
✔️ You may owe tax on prior deductions

IRS Reference Links

📦 Small Business Essentials — Recommended Tools

*As an Amazon Associate, EA Tax Guide may earn from qualifying purchases.

📚 Home Business Tax Deductions Series (2025)

  1. ① Is Your Home Business Really a Business?
  2. ② Do You Have a Profit Motive?
  3. ③ Can You Deduct Your Startup Costs?
  4. ④ Operating Expenses You Can Deduct
  5. ⑤ Section 179 & Bonus Depreciation
  6. ⑥ Home Office Deduction
  7. ⑦ The QBI 20% Deduction
  8. ⑧ Car & Local Travel Expenses
  9. ⑨ Out-of-Town Travel Rules
  10. ⑩ Inventory Rules
  11. ⑪ Employees vs. Contractors
  12. ⑫ Health Insurance & Medical Deductions
  13. ⑬ Retirement Plan Deductions
  14. ⑭ Additional Business Deductions
  15. ⑮ Crypto in Your Business
  16. ⑯ Recordkeeping & Accounting
  17. ⑰ Spouses in Business Together
  18. ⑱ How to Avoid an IRS Audit

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