Depreciation is one of the most powerful — and most underused — tax tools available to business owners. Every piece of equipment, every vehicle, every business improvement you purchase can be deducted over time. But with the right strategy, many of those assets can be fully deducted in the year of purchase — creating significant tax savings exactly when you need them.
FJ & Associates, PLLC helps Utah businesses identify depreciation opportunities, select the optimal method, and time purchases for maximum tax impact.
Talk to a Utah CPA today: (801) 927-1337 | Schedule a consultation →
How Business Depreciation Works
When a business purchases a long-term asset — equipment, machinery, a vehicle, computers, furniture — the IRS requires the cost to be recovered over the asset’s “useful life” using the Modified Accelerated Cost Recovery System (MACRS). Different asset classes have different recovery periods:
| Asset Type | MACRS Recovery Period |
|---|---|
| Computers, technology equipment | 5 years |
| Automobiles and light trucks | 5 years |
| Office furniture and fixtures | 7 years |
| Land improvements (parking, landscaping) | 15 years |
| Residential rental property | 27.5 years |
| Commercial real estate | 39 years |
Standard MACRS depreciation spreads the deduction over multiple years. But two elections — Section 179 and bonus depreciation — allow businesses to take much larger deductions immediately.
Section 179 Expensing
Section 179 of the Internal Revenue Code allows businesses to deduct the full cost of qualifying property in the year it is placed in service, rather than depreciating it over its useful life.
2026 Section 179 limits:
- Maximum deduction: $2,560,000
- Phase-out threshold: $4,090,000 (deduction reduces dollar-for-dollar above this level)
- Now permanent and indexed annually for inflation under current law
- Cannot exceed net taxable business income — unused amounts carry forward
What qualifies for Section 179:
- Machinery and equipment
- Business vehicles (subject to luxury auto limits)
- Off-the-shelf software
- Certain improvements to nonresidential real property (HVAC, roofing, fire protection, alarm systems)
- Qualified improvement property
What does NOT qualify:
- Real property (land and buildings)
- Property used outside the U.S.
- Property used for personal purposes more than 50% of the time
Bonus Depreciation
Bonus depreciation allows businesses to immediately deduct the cost of qualifying assets — including used property, which Section 179 also covers, but with no income limitation.
100% bonus depreciation is back — permanently. Bonus depreciation has been restored to 100% on a permanent basis for qualifying property placed in service after January 19, 2025, with no annual dollar limit. That means the full cost of eligible new and used assets can be deducted in the year they are placed in service — with no scheduled phase-down.
Key difference from Section 179: Bonus depreciation can create or increase a net operating loss (NOL), which can then be carried forward to offset future income. Section 179 cannot exceed your business income.
Strategy note: With 100% bonus depreciation now permanent, businesses have powerful, predictable expensing for major equipment purchases — but the choice between Section 179 and bonus depreciation still depends on your income, entity type, and multi-year tax picture. See our advanced tax planning guide for how depreciation fits into overall tax strategy.
Section 179 vs. Bonus Depreciation
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| 2026 deduction rate | Up to $2,560,000 maximum | 100% of cost |
| Annual dollar limit | $2,560,000 (phase-out begins at $4,090,000) | No limit |
| Can create a net operating loss? | No — capped at business income | Yes |
| New and used property | Yes | Yes |
| Election control | Asset-by-asset | Applies by asset class |
| Status under current law | Permanent, indexed for inflation | Permanent at 100% |
Vehicle Depreciation Rules
Business vehicles are subject to additional IRS limitations — the “luxury auto” limits — that cap annual depreciation deductions for passenger automobiles regardless of cost.
Heavier vehicles escape these limits. SUVs and trucks with a gross vehicle weight rating (GVWR) over 6,000 pounds qualify for Section 179 expensing up to a heavy-SUV cap of $32,000 in 2026 (now permanent and indexed annually for inflation) — and may also qualify for 100% bonus depreciation on the remaining cost. This is why many business owners specifically purchase vehicles that qualify for heavier vehicle treatment.
Mileage vs. actual expense method: For vehicles used partially for business, you can deduct either actual expenses (depreciation, insurance, fuel, maintenance) prorated for business use, or the IRS standard mileage rate. We analyze which method produces the larger deduction for your situation.
Cost Segregation for Real Property
If your business owns commercial real estate — or has recently purchased or renovated a building — cost segregation is one of the highest-impact depreciation strategies available.
A cost segregation study is an engineering analysis that reclassifies components of a building from 39-year straight-line depreciation into shorter-lived categories (5, 7, or 15 years). Components like specialized wiring, plumbing, flooring, certain HVAC systems, and site improvements often qualify.
The result: Dramatically accelerated depreciation in the first 5–7 years of ownership — often generating $50,000–$500,000+ in additional Year 1 deductions depending on the building’s value. With 100% bonus depreciation now permanent, the reclassified shorter-lived components can frequently be expensed immediately.
Cost segregation is most valuable for:
- Buildings valued at $1 million or more
- Properties purchased or constructed in the last 5–7 years (retroactive studies are allowed)
- Businesses that have recently completed major renovations
Depreciation Strategy FAQs
Should I take Section 179 or bonus depreciation?
It depends on your income and tax situation. Section 179 is capped at business income — it cannot create a loss. Bonus depreciation has no such limit and is now permanently set at 100%. In many cases, we recommend Section 179 first (for precise, asset-by-asset control) and bonus depreciation for the remainder. The optimal combination depends on your projected income and future tax rates.
Can I depreciate property I’m still paying off?
Yes. Depreciation is based on when the property is placed in service — not when it’s fully paid for. You can deduct the full cost in Year 1 under Section 179 or bonus depreciation even if you financed the purchase.
What records do I need to support depreciation deductions?
You need purchase receipts or invoices, proof of the date the asset was placed in service, documentation of business use percentage (especially for vehicles — a mileage log), and records of cost basis for improvements. We help clients maintain compliant depreciation schedules.
What happens to depreciation if I sell an asset?
When you sell a depreciated asset, the IRS recaptures the depreciation at ordinary income rates (up to 25% for real property). This is called depreciation recapture. Understanding recapture is critical when evaluating whether to sell assets — and when planning for business exits.
Is it too late to claim depreciation I missed in prior years?
Not always. You may be able to file an amended return (Form 1040-X or 1120-X) for prior years still within the statute of limitations. Additionally, a cost segregation study can be applied retroactively through a “catch-up” deduction in the current year without amending returns. We assess your options.
Make Your Equipment Work Twice — For Your Business and Your Taxes
FJ & Associates, PLLC helps Utah business owners turn equipment, vehicles, and real estate into immediate tax savings. Let’s build a depreciation strategy around your next purchase.
- Call: (801) 927-1337
- Email: admin@cpaone.net
- Visit: 612 N Kays Dr Suite 120, Kaysville, UT 84037
Schedule a Depreciation Strategy Consultation →
See also: Advanced Tax Planning | Utah Business Tax Services
Missy Dennis, CPA | Partner | FJ & Associates, PLLC | Kaysville, Utah
Missy holds a Master of Accounting degree from the University of Utah and is a licensed Certified Public Accountant. She is committed to providing clear, accurate, and actionable guidance so clients can navigate complex financial decisions with confidence. With more than twenty years of public accounting experience, Missy Dennis specializes in: tax preparation and tax advisory; bookkeeping strategy alignment; estate and trust taxation; audit and consulting services; low-income housing tax credits; non-profit accounting; and small- and mid-sized business advisory.
