Guide for Self-Employed Professionals
100% Bonus Depreciation Is Back for Self-Employed (2026)
The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualifying property. If you buy equipment, computers, or vehicles for your business in 2026, you can likely deduct the full cost in the year you put it to use.
Key Takeaways
- The One Big Beautiful Bill Act (OBBBA), signed July 2025, permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025.
- Unlike Section 179, bonus depreciation has no taxable income limitation. It can create or increase a net operating loss, which is valuable for new or lower-income businesses.
- Qualifying property includes computers, equipment, furniture, vehicles, and off-the-shelf software with a recovery period of 20 years or less. Both new and used property qualify.
- Bonus depreciation is claimed on Schedule C, Line 13 via Form 4562. For items costing $2,500 or less, the de minimis safe harbor (Line 22) is simpler.
If you're self-employed and planning to buy equipment, a computer, a vehicle, or other tangible business property in 2026, there's very good news: you can deduct 100% of the cost in the year you start using it.
This wasn't always certain. Under the Tax Cuts and Jobs Act (TCJA), 100% bonus depreciation was phasing out year by year. But the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, reversed the phase-down and made full expensing permanent.
Here's what changed, what qualifies, how bonus depreciation compares to Section 179, and exactly how to claim it on your Schedule C.
What Changed: The Phase-Down That Got Reversed
Under the original TCJA (2017), businesses could deduct 100% of the cost of qualifying property in the year it was placed in service. That was a powerful incentive. But the law included a built-in phase-down starting in 2023:
| Tax Year | Original TCJA Rate | After OBBBA |
|---|---|---|
| 2022 and earlier | 100% | 100% |
| 2023 | 80% | 80% |
| 2024 | 60% | 60% |
| 2025 (before Jan 20) | 40% | 40% |
| 2025 (after Jan 19) | 40% | 100% |
| 2026 | 20% | 100% |
| 2027 and beyond | 0% | 100% (permanent) |
The critical date is January 19, 2025. Property acquired after that date qualifies for 100% bonus depreciation under the OBBBA. Property acquired before that date under a binding written contract is still subject to the old TCJA percentages.
For anything you buy for your business in 2026, the full 100% rate applies.
What Property Qualifies for Bonus Depreciation?
Bonus depreciation applies to tangible, depreciable business property with a MACRS recovery period of 20 years or less. In practical terms, that covers most things self-employed people buy for their businesses.
Property that qualifies.
New and used property both qualify.
Under the OBBBA, bonus depreciation applies to both new and used property, as long as it's the first time you are using it. Buying a refurbished laptop or a used work truck still qualifies. The only restriction is that you can't have previously owned the property yourself (or acquired it from a related party).
What does not qualify.
Real property (buildings, structural components) with a recovery period longer than 20 years generally does not qualify, though the OBBBA introduced a separate temporary provision for certain “qualified production property.” Land never qualifies for depreciation of any kind.
Section 179 vs. Bonus Depreciation: Which Should You Use?
Both Section 179 and bonus depreciation let you deduct the full cost of qualifying property in year one. But they work differently, and the right choice depends on your situation.
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| 2026 deduction rate | 100% (up to limit) | 100% |
| Maximum deduction | $2,560,000 | No limit |
| Income limitation | Cannot exceed taxable business income | None (can create a loss) |
| Election required? | Yes, on Form 4562 | No (applies automatically unless you opt out) |
| New and used property? | Yes | Yes |
| Business use requirement | More than 50% | More than 50% |
| Unused deduction | Carries forward | Creates net operating loss (can carry forward) |
Use Section 179 when...
You have enough business income to absorb the deduction and you want to choose specific assets to expense. Section 179 gives you more control because you elect it on a per-asset basis.
Use bonus depreciation when...
Your business income is low, negative, or unpredictable. The big advantage of bonus depreciation is that it has no income limitation. If your Schedule C shows a $2,000 profit but you bought a $5,000 computer, bonus depreciation lets you take the full $5,000 deduction anyway. The resulting $3,000 loss can offset other income (like a spouse's W-2 wages) or carry forward.
In practice, many self-employed people use both. The common approach is to elect Section 179 for specific priority assets, then let bonus depreciation apply automatically to the rest. For a deeper look at all the methods (including MACRS), see our Supplies vs. Equipment vs. Depreciation guide.
The De Minimis Safe Harbor: When You Don't Need Depreciation at All
Before reaching for Section 179 or bonus depreciation, check the price tag. If a business purchase costs $2,500 or less per item, you can expense it immediately using the de minimis safe harbor. No Form 4562, no depreciation calculations, no multi-year tracking.
How it works
The $2,500 limit applies per item or per invoice. You elect the safe harbor by attaching a statement to your tax return (most tax software handles this automatically). Items expensed under the safe harbor go on Schedule C, Line 22 (Supplies) or the appropriate expense line.
Why this matters for bonus depreciation planning
The de minimis safe harbor is simpler than bonus depreciation. If your purchase is under $2,500, use the safe harbor. Save bonus depreciation for the bigger purchases that exceed the threshold. A $2,200 tablet goes on Line 22 as a supply. A $3,000 laptop goes on Line 13 via Form 4562 using bonus depreciation.
Real-World Examples: Bonus Depreciation in Action
Let's see how bonus depreciation works with purchases self-employed people actually make.
Example 1: $3,000 laptop for freelance development
You buy a MacBook Pro in March 2026 for $3,000 and use it 100% for your freelance web development business. Since the cost exceeds $2,500, the de minimis safe harbor doesn't apply. You claim the full $3,000 using bonus depreciation on Schedule C, Line 13 via Form 4562. Your tax savings: $3,000 multiplied by your combined marginal tax rate (income tax + 15.3% self-employment tax). At a 22% income tax bracket, that's roughly $1,119 in tax savings.
Example 2: $5,000 camera setup for a content creator
You buy a camera body ($3,200), a lens ($1,200), and a lighting kit ($600) for your photography and video business. The lens and lighting kit are each under $2,500, so they qualify for the de minimis safe harbor (Line 22). The $3,200 camera body exceeds the threshold, so you deduct it using bonus depreciation on Line 13 via Form 4562. Total first-year deduction: the full $5,000.
Example 3: $15,000 work vehicle
You buy a used pickup truck for $15,000 and use it 80% for your landscaping business. Vehicles have special rules. If the truck is a passenger vehicle (under 6,000 lbs GVWR), the first-year depreciation cap with bonus depreciation is $20,300 for 2026. Your business-use portion is $12,000 (80% of $15,000), which is under the cap, so you can deduct the full $12,000 in year one. If the truck is a heavy vehicle (over 6,000 lbs GVWR), the passenger vehicle caps don't apply, and you can deduct the full business-use amount using bonus depreciation.
Example 4: Bonus depreciation with low business income
You started a consulting business in October 2026 and earned $4,000 by year-end. You also bought a $6,000 workstation setup. With Section 179, you could only deduct $4,000 (limited to business income), and the remaining $2,000 would carry forward. With bonus depreciation, you deduct the full $6,000. The resulting $2,000 net operating loss can offset other income on your return (like a W-2 job or a spouse's income) or carry forward to future years.
How to Claim Bonus Depreciation on Schedule C
Claiming bonus depreciation requires Form 4562 (Depreciation and Amortization). The deduction flows to Schedule C, Line 13. Here's the step-by-step process.
Step 1: Determine business-use percentage.
If you use the asset exclusively for business, it's 100%. If you use it for both business and personal purposes, calculate the business-use percentage honestly. You need more than 50% business use to qualify for bonus depreciation at all. A $3,000 laptop used 75% for business has a depreciable basis of $2,250.
Step 2: Fill out Form 4562.
Report the asset in Part III (MACRS Depreciation) of Form 4562. Bonus depreciation is the default for qualifying property, so your tax software will typically apply it automatically when you enter a business asset. If you want to elect Section 179 instead (or in addition), indicate that in Part I of Form 4562.
Step 3: The deduction flows to Schedule C, Line 13.
The total depreciation and Section 179 deductions from Form 4562 carry over to Line 13 of your Schedule C. This reduces your net business income (or increases your loss).
Step 4: Keep records.
Save the receipt or invoice, note the date you started using the asset for business, and document your business-use percentage. If the IRS asks, you'll need to support your deduction.
Tax software note
Most tax software (TurboTax, FreeTaxUSA, H&R Block) handles Form 4562 automatically when you add a business asset. You typically enter the purchase price, date, and business-use percentage, and the software calculates the depreciation for you. If it gives you an option between Section 179 and bonus depreciation, choose based on whether you need the income limitation protection of bonus depreciation.
When NOT to Use Bonus Depreciation
Bonus depreciation is powerful, but it's not always the best choice. Here are situations where a different approach makes more sense.
The item costs $2,500 or less.
Use the de minimis safe harbor instead. It's simpler, doesn't require Form 4562, and gets you the same result: a full deduction in year one. A $1,800 monitor belongs on Line 22 as a supply, not on Line 13 as a depreciated asset.
You want to spread deductions across multiple years.
If your income fluctuates significantly and you expect to be in a higher tax bracket next year, it might save you more in total taxes to depreciate the asset over its recovery period using MACRS depreciation. You can elect out of bonus depreciation on a class-by-class basis (all 5-year property, all 7-year property, etc.).
Business use is 50% or less.
If you use the asset for business half the time or less, it doesn't qualify for bonus depreciation or Section 179. You must use the Alternative Depreciation System (ADS) with straight-line depreciation spread over the asset's recovery period.
You might sell the asset soon.
If you deduct the full cost using bonus depreciation and then sell the asset later, you'll owe taxes on the “recaptured” depreciation. For example, if you claimed $5,000 in bonus depreciation on a camera setup and sell it for $3,000 a year later, that $3,000 becomes ordinary income on your return. This doesn't mean you shouldn't use bonus depreciation. Just be aware of recapture if you plan to sell high-value assets.
Special Rules for Vehicles
Vehicles are the one area where bonus depreciation doesn't always mean “deduct the full cost.” Passenger vehicles (under 6,000 lbs GVWR) are subject to annual “luxury auto” depreciation caps set by the IRS, even when bonus depreciation applies.
Passenger vehicles (under 6,000 lbs GVWR)
For 2026, the first-year depreciation limit with bonus depreciation is $20,300. So if you buy a $35,000 sedan for 100% business use, you can deduct $20,300 in year one, not $35,000. The remaining cost is deducted in later years under the annual depreciation caps.
Heavy vehicles (over 6,000 lbs GVWR)
Heavy trucks, vans, and SUVs with a GVWR over 6,000 lbs are not subject to the passenger vehicle caps. However, heavy SUVs have a separate Section 179 cap of $32,000 for 2026. Bonus depreciation has no such cap, so a $50,000 heavy SUV used 100% for business could be fully deducted using bonus depreciation in year one.
Vehicle depreciation is one of the more complex areas of the tax code. If you're making a significant vehicle purchase for your business, consulting a tax professional is worth the cost.
Quick Reference: Which Deduction Method to Use
| Situation | Best Method | Schedule C Line |
|---|---|---|
| Item costs $2,500 or less | De minimis safe harbor | Line 22 (Supplies) |
| Item costs over $2,500, strong business income | Section 179 | Line 13 (Depreciation) |
| Item costs over $2,500, low or negative income | Bonus depreciation | Line 13 (Depreciation) |
| You want deductions spread over multiple years | MACRS depreciation | Line 13 (Depreciation) |
| Business use is 50% or less | ADS straight-line | Line 13 (Depreciation) |
The Bottom Line
The return of 100% bonus depreciation under the OBBBA is a significant benefit for self-employed people buying equipment, computers, vehicles, and other business property. The phase-down that started in 2023 is gone, and full expensing is now permanent.
For most purchases over $2,500, bonus depreciation is the simplest path to a full first-year deduction. It applies automatically (no election needed), works with both new and used property, and has no income limitation. For smaller purchases, the de minimis safe harbor keeps things even simpler.
The key is getting each purchase on the right line of your Schedule C: Line 13 for depreciated assets (via Form 4562), Line 22 for supplies and de minimis items. Whether it's a $3,000 laptop or a $15,000 truck, the tax code gives you good options to deduct the full cost right away.
Not sure how to categorize your business purchases? Categorize My Expenses can sort your transactions into the correct Schedule C lines, distinguishing supplies from depreciable equipment so you know exactly what goes where at tax time.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or financial advice. Tax rules change, and individual situations vary. The bonus depreciation rules and Section 179 limits referenced are based on current law as of early 2026, including changes from the One Big Beautiful Bill Act (OBBBA). Vehicle depreciation caps are based on IRS guidance for 2026. Consult a qualified tax professional for advice specific to your situation. Categorize My Expenses is a financial data organization tool. It is not a tax preparer and does not provide tax advice.
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