Two federal routes to deducting an asset in year one
Normally the cost of equipment, vehicles, furniture or software used in a business is recovered through depreciation over several years. Federal law offers two ways to accelerate that.
Section 179 lets a business elect to expense the cost of qualifying property in the year it is placed in service, up to an annual dollar limit that is reduced once total qualifying purchases pass a threshold. Bonus depreciation under Section 168(k) is an additional first-year allowance for qualified property. The two work differently, and many businesses use one, the other, or both.
The federal figures for 2025 and 2026
Public Law 119-21, enacted July 4, 2025, made 100% bonus depreciation permanent for qualified property acquired after January 19, 2025, and raised the Section 179 limits. The acquisition date is set by the binding contract: property is not treated as acquired after the date a written binding contract for it was signed. A taxpayer may instead elect 40% bonus (60% for certain long-production property) for its first tax year ending after January 19, 2025.
| Item | Tax year 2025 | Tax year 2026 |
|---|---|---|
| Bonus depreciation, property acquired after January 19, 2025 | 100% | 100% |
| Bonus depreciation, property acquired after September 27, 2017 and before January 20, 2025, placed in service in 2025 | 40% | Not applicable |
| Section 179 dollar limit | $2,500,000 | $2,560,000 |
| Section 179 reduction begins when qualifying purchases exceed | $4,000,000 | $4,090,000 |
Figures checked on 28 September 2026 against Revenue Procedure 2025-32, IRS Publication 463 and the IRS summary of the 2025 business provisions. The 2027 inflation-adjusted Section 179 figures have not been published yet.
Massachusetts: no bonus depreciation
The Department of Revenue states it plainly: Massachusetts does not allow the bonus depreciation deduction for qualified property under Section 168(k). That rule is not new, and it was not changed by the 2025 federal law.
In practice, an asset that received bonus depreciation on the federal return is depreciated under the regular rules for Massachusetts. The Massachusetts deduction is spread over the asset's recovery period, so in the purchase year it is much lower, and in later years it is higher than the federal figure, which has already been used up. The difference evens out over the life of the asset, but only if both sets of figures are tracked.
Massachusetts: Section 179 without the 2025 increases
Massachusetts does allow Section 179, but for tax years beginning on or after January 1, 2025 and before January 1, 2027, it allows the deduction without regard to the amendments made by Public Law 119-21. The Department of Revenue says a taxpayer must recalculate any Section 179 deduction to remove the effect of those amendments, and that to claim Section 179 for Massachusetts purposes you must have claimed it federally.
The legislation that set this rule, Chapter 101 of the Acts of 2026, delays Massachusetts conformity to the higher federal Section 179 limits until tax years beginning on or after January 1, 2027. The same law also delays conformity for Section 168(n) qualified production property for 2025 and 2026.
For reference, before the 2025 law changed them, the IRS had announced 2025 Section 179 figures of $1,250,000, reduced once qualifying purchases exceeded $3,130,000 (Revenue Procedure 2024-40). Most small businesses never approach either limit, federal or state. For them the Massachusetts difference comes mainly from bonus depreciation, not from the Section 179 ceiling.
| Federal | Massachusetts | |
|---|---|---|
| Bonus depreciation (Section 168(k)) | 100% for property acquired after January 19, 2025 | Not allowed; depreciate under the regular rules |
| Section 179 | Higher limits under Public Law 119-21 | Allowed without the Public Law 119-21 increases; recalculate |
| Section 179 claimed only on the state return | Not applicable | Not allowed; it must also be claimed federally |
| Qualified production property (Section 168(n)) | New deduction | Not allowed for 2025 and 2026 |
| Conformity to the higher Section 179 limits | In effect | Delayed to tax years beginning on or after January 1, 2027 |
An illustrative example
Illustrative only. A Massachusetts sole proprietor buys a $50,000 piece of equipment in 2026, acquired after January 19, 2025, and places it in service that year. Federally, the owner could deduct the full $50,000 in 2026 through bonus depreciation, or elect Section 179 for the full cost, since it is well under the limit.
If the owner uses bonus depreciation, the Massachusetts return does not allow it. For Massachusetts, the equipment is depreciated over its recovery period under the regular rules, so the 2026 Massachusetts deduction is only the first year's share, and the rest is deducted in later years when the federal return has nothing left to claim.
If the owner instead claims Section 179 federally, Massachusetts allows Section 179 as well, recalculated without the 2025 increases. For a $50,000 purchase that recalculation may not change the figure at all, because the amount is far below both the old and new limits. The choice between the two federal routes can therefore change the Massachusetts result even when the federal deduction is the same.
Which method is available for a given asset, and whether it is the right choice, depends on the property, the business's income and other facts. The point of the example is only that the federal and Massachusetts figures can diverge.
Why this matters when planning a purchase
Year-end equipment purchases are often timed around the federal deduction. That is only half the picture for a Massachusetts owner. A full federal write-off can still leave Massachusetts taxable income close to what it would have been without the purchase.
It also affects S corporations. The corporation's depreciation flows through to the shareholders, and the Massachusetts figures on the shareholder's return follow the state rules rather than the federal ones. The Department of Revenue's guidance applies the Section 179 recalculation to both personal income tax and the corporate excise net income measure.
- Confirm the acquisition date and any binding contract date before relying on 100% bonus
- Decide between bonus and Section 179 with both the federal and Massachusetts results in view
- Keep a separate Massachusetts depreciation schedule for every asset that received bonus depreciation
- Revisit the schedule in 2027, when Massachusetts conformity to the higher Section 179 limits begins
- Keep the asset file: purchase date, cost, method used federally and in Massachusetts, and disposal details
Selling the asset later
Because the federal and Massachusetts deductions differ, the asset's adjusted basis differs too. When it is sold, the gain or loss can be different on each return. That is one more reason the IRS asks businesses to keep asset records until the period of limitations expires for the year the property is disposed of, and why two schedules are easier to maintain from the start than to rebuild at the time of sale.
Where we come in
We keep federal and Massachusetts depreciation schedules side by side, prepare the returns from them, and talk through planned purchases before the year closes so the timing decision reflects both returns. We give you a scope and a price in writing before anything starts.
Figures on this page were checked against the IRS and Massachusetts sources listed alongside on 28 Sep 2026. They change — confirm the current amount before relying on one.
General information for owner-led businesses, not advice for your specific situation. Tax and accounting rules change, and how they apply depends on facts particular to your business. Talk to us — or to another qualified professional — before acting on anything here.
