Computer & Equipment (Section 179 / Bonus Depreciation) — United States Tax Rules

Deduct business computers and equipment in full using Section 179 or 100% Bonus Depreciation under OBBBA 2025 — state conformity varies significantly.

Claimable: Fully claimable · Tax authority: IRS (Internal Revenue Service)

IRS (Internal Revenue Service) Rules

• Equipment used for business can be deducted immediately (not depreciated over years) using Section 179 or Bonus Depreciation.
• Section 179 (2025): Deduct up to $1,220,000 of qualifying equipment in the year of purchase. Federal limit; phased out if total purchases exceed $3,050,000.
• 100% Bonus Depreciation (OBBBA 2025): Restored full 100% bonus depreciation for qualifying property placed in service after Jan 1, 2025 under the One Big Beautiful Budget Act. Previously phased down to 40% in 2025 before OBBBA passed.
• De Minimis Safe Harbor: Equipment costing $2,500 or less (per item) can be expensed immediately as a supply deduction without Section 179 or depreciation records (IRS Reg §1.263(a)-1(f)). Items over $2,500 should use Section 179 or Bonus Depreciation.
• Business-use requirement: only the business-use percentage is deductible. A laptop used 80% for business → deduct 80% of cost.
• OBBBA 2025 Restored 100% Bonus Depreciation: Your 2025 MacBook is Fully Deductible Federally. A MacBook Pro costing $3,200 purchased in 2025 can be deducted in full in the 2025 tax year on federal Form 4562.
• State conformity warning: California limits bonus depreciation to $25,000 via Section 179 and does not conform to full federal bonus depreciation. New Jersey does not conform to federal bonus depreciation. Minnesota has a pending conformity bill. Always check your state's rules — your state tax deduction may differ significantly from your federal deduction.

Limits

Federal Section 179 limit: $1,220,000 (2025). De Minimis Safe Harbor: $2,500 per item. Bonus Depreciation: 100% (federal, OBBBA 2025). State limits vary — CA caps at $25k S179, NJ disallows bonus depreciation.

Worked Example

Priya, a UX designer, buys a MacBook Pro for $3,200 in June 2025. She uses it 100% for business. Federal deduction options: (a) Section 179 — full $3,200 in 2025; (b) Bonus Depreciation — full $3,200 in 2025. She lives in California, so her state deduction is limited to $25,000 Section 179 (which still covers the full $3,200 for her, since it's under the CA limit). She reports the depreciation on Form 4562 and files Schedule C.

Record Keeping

• Keep the original purchase receipt showing the item, cost, and purchase date
• Record the date the equipment was placed in service for business use
• Note your business-use percentage for each item (especially if used personally too)
• Retain Form 4562 (Depreciation and Amortization) in your tax records for 3+ years
• Document state-specific deduction treatment separately if you are in a non-conforming state

Frequently Asked Questions

What is the difference between Section 179 and Bonus Depreciation?

Section 179 is an active election to expense qualifying equipment up to the annual limit ($1,220,000 in 2025). Bonus Depreciation applies automatically to qualifying property and is not limited by income (unlike Section 179, which cannot create a loss). For most self-employed individuals buying standard equipment, both produce the same result — full deduction in year one.

Does California allow full bonus depreciation?

No — California does not conform to federal bonus depreciation rules. California limits first-year equipment deductions to $25,000 via its own Section 179. If you buy a $3,200 MacBook, your federal deduction is $3,200 (bonus depreciation) but your California deduction is limited to $3,200 via CA Section 179 in this case — which works out the same for small purchases. For larger equipment, the gap can be significant.

What is the De Minimis Safe Harbor?

The De Minimis Safe Harbor (IRS Reg §1.263(a)-1(f)) allows you to expense items costing $2,500 or less per item directly as a supply deduction without any Section 179 election or depreciation records. You attach a brief statement to your return electing the safe harbor. Items over $2,500 need Section 179 or bonus depreciation treatment.