Bonus Depreciation Alongside Section 179: Stacking Both to Cut Your 2026 Tax Bill Further

We covered the basics in our Section 179 in 2026 guide, but Section 179 is only half of the tax picture for a contractor financing equipment this year. Bonus depreciation is the second lever, and understanding how the two stack together — instead of picking one or the other — is where the real tax savings show up on equipment you finance before year-end.

The 2026 Numbers

For 2026, the Section 179 deduction limit sits at $2,560,000, with the phase-out threshold starting once total qualifying equipment purchases exceed $4,090,000 and full phase-out at $6,650,000 — numbers that put the vast majority of small and mid-size contractors nowhere near the ceiling. Bonus depreciation, meanwhile, is currently set at 100% for qualified equipment acquired and placed in service after January 19, 2025, meaning a business can potentially write off the full cost of qualifying equipment in the year it's put to work, not spread over the asset's useful life.

Why You Use Both, Not Just One

The standard approach — and the one most CPAs recommend — is to apply Section 179 first, then apply bonus depreciation to whatever eligible basis remains. In practice, this matters most once you're financing multiple pieces of equipment in the same tax year: Section 179 gives you flexibility to choose exactly which assets and how much of each to deduct (useful if you want to manage taxable income precisely), while 100% bonus depreciation has no dollar cap and applies automatically to qualifying property, making it the backstop that ensures nothing gets left on the table even after you've allocated your Section 179 limit.

What This Actually Means for a Contractor Financing Equipment

Here's the part that surprises a lot of contractors: you don't need to pay cash for equipment to claim these deductions. Financed equipment qualifies for both Section 179 and bonus depreciation as long as it's placed in service by December 31 — meaning a contractor can finance a dozer, excavator, or dump truck with a small down payment, put it to work before year-end, and deduct the full qualifying cost against this year's taxable income while only having paid a fraction of the purchase price out of pocket. That's a materially different cash-flow picture than the old assumption that you need to buy outright to get the tax benefit.

Talk to Your CPA — Then Talk to Us About Financing

This isn't tax advice — talk to your CPA about your specific situation before year-end. But once you know what you want to buy, the financing math matters just as much as the tax math: see our rent vs. own breakdown for why financing beats renting even before you factor in the tax benefits above, and reach out to BFC to structure financing that gets equipment placed in service before the December 31 deadline.

State Taxes Are a Separate Question

Everything above covers federal Section 179 and bonus depreciation rules, but state tax treatment varies significantly — some states cap Section 179 well below the federal limit, and a few don't conform to federal bonus depreciation rules at all. If your business operates across state lines or in a state with its own equipment tax rules, factor that into the conversation with your CPA before assuming the full federal benefit applies to your state return as well.

A Realistic Example

Say a general contractor finances a $180,000 excavator with a modest down payment and gets it delivered and working on a job site by mid-December. Under current rules, that contractor can potentially deduct the full qualifying cost against this year's taxable income through the combination of Section 179 and 100% bonus depreciation — even though they've only paid a fraction of that $180,000 out of pocket so far. That's the mechanism that makes year-end equipment purchases genuinely attractive for a profitable contractor trying to manage a tax bill, not just a sales pitch line — but it only works if the equipment is actually placed in service, not just ordered, before December 31.

Timing matters here more than almost anything else in equipment financing — a machine sitting on a dealer's lot waiting for delivery in January doesn't count for this tax year. If you're considering a year-end purchase, start the financing conversation now rather than in the last week of December, since underwriting, delivery, and getting the machine actually working on a job site all take real time.

Ready to Put This Equipment to Work?

Renting keeps you writing checks forever with nothing to show for it. Financing or leasing-to-own through BFC puts every payment toward equipment your business actually keeps — and unlike lenders who make you wait years until one machine is paid off, we can help fund your next project before this one is. Apply for equipment financing today, or if you'd rather see what's already on the lot, browse BFC's equipment inventory for sale. Got a machine sitting idle? List it for sale on BFC's site for free — no commission. Learn more about BFC Equipment Loans on our home page.