Should Your Business Buy Equipment Before 2026 Ends? What the 100% Bonus Depreciation Rules Mean

If your business has been considering purchasing new equipment, machinery, computers, or other business property before the end of 2026, now is a good time to revisit that decision.

This years' federal tax changes brought back 100% bonus depreciation for qualifying property, this means that eligible businesses can deduct the full cost of certain purchases in the year the property is placed in service instead of spreading the deduction over several years.

But that does not mean every business should rush out and buy equipment before December 31, 2026.

The tax deduction is only one part of the decision. In this article we'll discuss what business owners should know before making a year end purchase.

What Is 100% Bonus Depreciation?

Normally, when a business purchases equipment or other long term property, the cost is generally recovered through depreciation over a number of years.

Bonus depreciation allows a business to take an additional first-year deduction for qualifying property.

Under the current rules, 100% bonus depreciation is available for qualifying property acquired after January 19, 2025, subject to the applicable requirements.

This means a qualifying business purchase placed in service in 2026 may potentially receive a deduction for the entire eligible cost in the first year.

For example, suppose a business purchases $40,000 of qualifying equipment and places it in service during 2026. If the equipment qualifies for 100% bonus depreciation, the business may potentially deduct the full $40,000 in 2026 rather than depreciating the cost over several years.

The actual deduction depends on the type of property, how it is used, and the taxpayer's specific circumstances.

For additional details on the 100% bonus depreciation rules and the IRS guidance issued in 2026, visit: IRS: Guidance on the Additional First-Year Depreciation Deduction

What About Section 179?

Bonus depreciation is not the only option available to businesses.

Section 179 allows businesses to elect to expense the cost of qualifying property rather than depreciating it over time.

For 2026, the maximum Section 179 deduction is $2.56 million. The deduction begins to phase out when the total cost of qualifying Section 179 property placed in service during the year exceeds $4.09 million.

The rules and limitations are different from bonus depreciation, so it's important that you talk to a  tax professional, who will consider both when determining the appropriate treatment for a business purchase.

Should You Buy Equipment Before December 31?

Not necessarily.

A tax deduction can make a purchase more attractive, but spending $40,000 simply to receive a tax deduction does not mean the business saved $40,000.

Instead, consider questions such as:

• Does the business actually need the equipment?
• Will the purchase help increase revenue/improve efficiency?
• Does the business have enough cash flow to comfortably make the purchase?
• Would financing make more sense than paying cash?
• Will the purchase create other costs, such as maintenance, insurance, or training?
• Does the business expect to have enough taxable income to make the deduction particularly useful?

These questions are especially important for small businesses where a large purchase can have a meaningful effect on cash flow.

And remember, the return of 100% bonus depreciation can create valuable opportunities, but the tax deduction should be part of the decision rather than the reason for the decision.

Don't Forget: The Equipment Needs to Be Placed in Service

Buying equipment is not necessarily the same thing as putting it into service.

For depreciation purposes, the timing of when property is placed in service matters. A business should not assume that simply ordering or paying for equipment in December automatically creates a 2026 deduction.

If you're considering a significant purchase by the end of the year, discuss the timing with a CPA before completing the transaction.

Planning a Major Business Purchase Before Year-End?

If your business is considering equipment, machinery, vehicles, technology, or other major purchases before the end of 2026, it may be worth reviewing the tax implications before making the purchase.

At DRS Accounting, we help small business owners look at tax planning decisions throughout the year, not just when it is time to file the return, schedule a complimentary consultation with us, we're here to help.