Section 179 vs bonus depreciation

Section 179 and bonus depreciation both let a business deduct the full cost of an asset in the year it goes into service instead of spreading it out. Because they look so similar, people treat them as the same thing. They are not, and for real estate the differences decide which one you actually use, and sometimes whether you can use either.

Here is the fast version. Bonus depreciation is the workhorse for rental real estate: no dollar cap, and it can create or deepen a loss. Section 179 is narrower and capped, but it reaches a few things bonus depreciation cannot, most importantly roofs and HVAC on commercial buildings. For most residential landlords, bonus depreciation does the heavy lifting and Section 179 barely applies.

Bonus depreciation is the default tool for rental real estate; Section 179 is the specialist you reach for when bonus depreciation cannot cover the asset.

Where they differ, and why it matters

Four differences do all the work.

The dollar cap. Section 179 is limited. For 2025 you can expense up to $2.5 million, and that deduction starts shrinking once you place more than $4 million of qualifying property in service, both figures indexed for inflation going forward. Bonus depreciation has no cap at all. Deduct $200,000 or $20 million, the percentage is the same.

The loss rule. This is the big one for real estate. Section 179 cannot create a loss; it is limited to your business income for the year, so it can take you to zero but not below. Bonus depreciation has no such limit. It can drive your taxable income negative and generate the kind of loss that, if you can use it, offsets other income. For an investor whose whole plan is to create a large deductible loss, that difference is decisive.

The property it covers. Here Section 179 has a genuine edge. It applies to certain improvements to nonresidential buildings that bonus depreciation often cannot reach: roofs, HVAC systems, fire protection, and security systems, installed after the building was placed in service. Bonus depreciation is generally limited to property with a 20-year-or-less life, and a new commercial roof usually is not that. So for a commercial owner replacing a roof or an HVAC unit, Section 179 may be the only route to a first-year deduction.

The income-property problem. Section 179 requires the property be used in an active trade or business. Property held purely to produce income, which is how many passive residential rentals are treated, often does not qualify for 179 at all. Bonus depreciation carries no such active-business gate. This is a large part of why residential landlords lean on bonus depreciation and rarely touch Section 179.

Section 179 cannot create a loss and often excludes passive rental property; bonus depreciation can create a loss and does not care whether your rental is active.

They are not either-or

Despite the “versus” in the title, these two are usually used together, not chosen between. The standard order is Section 179 first, on the specific assets that need it, such as a commercial roof bonus cannot cover, and then bonus depreciation on everything else. A cost-segregation study feeds both: it identifies the short-life property bonus depreciation sweeps up, and it can identify the qualifying improvements where Section 179 fills the gaps.

A worked comparison

Say you own a commercial building and in one year you buy $150,000 of qualifying equipment and short-life property, and you also replace the roof for $100,000.

The equipment and short-life property, all under the 20-year line, get 100% bonus depreciation: $150,000 deducted in year one, no cap, and it can push you into a loss. The roof is not bonus-eligible, but it is Section 179 property for a nonresidential building. If your business income supports it, you can expense that $100,000 under Section 179, taking you down toward zero but not into a loss on that piece. Between the two tools, the whole $250,000 is deductible this year, each asset routed to the provision that fits it.

Use Section 179 for the assets bonus depreciation cannot reach, then let bonus depreciation take everything else, and a cost-segregation study tells you which is which.

The bottom line

• Both deduct an asset’s cost in year one, but they follow different rules.
• Bonus depreciation has no dollar cap and can create a loss; it is the workhorse for rental real estate.
• Section 179 is capped, cannot create a loss, and often excludes passive rental property.
• Section 179’s advantage is coverage: roofs, HVAC, fire, and security on commercial buildings, which bonus often cannot touch.
• They stack: apply Section 179 first where needed, then bonus depreciation on the rest.

For the tool most rentals actually use, read bonus depreciation explained. To see where both fit, start at the depreciation and cost segregation hub.

Last verified August 2026.