A shop buys an $80,000 CNC router on March 15, 2026, assumes "bonus is still 100%," and tells the lender the Year 1 deduction is $80,000. In July, the CPA explains the Tax Cuts and Jobs Act phase-down made 2026 40% bonus under current law — $32,000 bonus plus roughly $9,600 of MACRS on the remaining basis, not $80,000 — and the $58,000 gap must be carried forward over the next six years unless Congress restores 100%. Across town, a second owner models both scenarios before signing: 40% now in the pro forma, 100% as upside only if the One Big Beautiful Bill Act (OBBBA) retroactivity the tax press has tracked all year actually signs, and chooses Section 179 to cover the first $80,000 of basis regardless, preserving flexibility while the bonus rate is in flux.
By 2026, bonus depreciation sits at the most awkward point in its 10-year legislative arc — low enough to surprise owners who remember 100%, and politically volatile enough that both parties have offered 100% restoration with different effective dates. Add the interaction with Section 179 ($1.25M limit in 2025, indexed toward ~$1.315M for 2026) and with Section 174 mandatory capitalization (5-year domestic, 15-year foreign), and an $80K equipment buy has three plausible Year 1 answers that differ by tens of thousands. This guide maps what current law gives you, what OBBBA-style retroactivity would change, how to choose between bonus and 179 on the same asset, and the ledger entries that keep the 40/60 bought in the same year from becoming a depreciation tangle when the rate changes retroactively.
The Phase-Down You Are Living In — 40% Is Current Law
Bonus was 100% for most property placed in service from September 28, 2017 through December 31, 2022, then steps down by 20 points a year under §168(k) as written by the Tax Cuts and Jobs Act:
- 2022: 100%
- 2023: 80%
- 2024: 60%
- 2025: 40% under the same schedule where long-production-period and certain aircraft get a one-year grace
- 2026: 40% (20% in 2027, 0 thereafter) — except long-production-period property and certain aircraft placed in service in 2026 still get 40% in 2026 and 20% in 2027, a nuance that matters for a build-to-order machine with a 12-month fabrication window.
For a calendar-year taxpayer buying 5-year MACRS property (most equipment, computers, machinery) placed in service in 2026, current law gives 40% of cost immediately, then normal MACRS (200% declining balance, half-year convention) on the remaining 60% of basis.
An $80,000 5-year router on March 15, 2026 under current law:
- Bonus: $80,000 × 40% = $32,000
- Remaining basis: $48,000 × first-year MACRS 20% = $9,600
- Year 1 total: $41,600 — not $80,000. The other $38,400 spreads as $15,360 (Year 2), $9,216 (Year 3), $5,530 (Year 4), $5,530 (Year 5), $2,765 (Year 6) under the normal table, before any Section 179 election.
Buy the same router on January 10, 2026 but it has a qualifying long production period (manufacture >1 year, etc.) and the 2026 rate for that class is still 40% — same math. Buy certain aircraft with the grace and you may still be at 60% for a 2025 delivery — check the property class before assuming the headline rate.
What Retroactive 100% Would Change — and What It Would Not Retroactively Fix
The House-passed versions of the One Big Beautiful Bill Act and the standalone Tax Relief for American Families and Workers Act discussion that carried through OBBBA deliberations in 2024-2026 each included retroactive restoration of 100% bonus — typically to property placed in service after December 31, 2022 (for some drafts) or after January 18, 2023, and in OBBBA drafts retroactive to January 20, 2025 or January 1, 2025 with 100% thereafter. The political appeal is obvious; the legislative outcome remains un-signed as of this guide's writing.
What a January 2025 retroactive 100% would mean if signed late in 2026:
- A 2025 return already filed at 40% would be wrong. You would amend 2025 (1120/1120-S/1065/1040 + 4562) to claim the incremental 60% — e.g., an $80K machine filed with $32K bonus becomes $80K bonus, picking up $48,000 of additional 2025 deduction on the amended return, with downstream effects on QBI, SE tax, state adjustments, and possibly NOL generation. A seller who already disposed of the asset in 2026 would have a basis adjustment to make on the disposition year.
- A 2026 asset not yet filed would simply be filed at 100%. The $80K router becomes $80,000 Year 1 — no MACRS layering for bonus-eligible basis.
- State conformity would still diverge. Roughly 15–20 states decouple from federal bonus (California most notably takes no bonus). A federal retroactive 100% often has no state effect unless the state conforms — California still takes only MACRS. Your federal pro forma and your state pro forma are two different numbers; only the federal restores.
- Already-filed elections stand. If you elected out of bonus for the 5-year class on a timely return (the §168(k)(7) class-by-class opt-out), that election is irrevocable for that year/class — a later 100% restoration does not reopen it. The §168(k)(7) election is the sleeper that turns a political win into a locked-in loss.
Modeling discipline while the law is pending: Run every 2025–2026 capex decision as current law (40% / 20% thereafter) = base case, 100% retroactive = upside. Quote the lender, the partner, and the cash-flow forecast the base case; describe the 60% swing as contingent legislation, not as the plan.
Bonus vs. Section 179 — Two Doors to Year 1, Different Locks
Bonus and Section 179 both accelerate Year 1 cost recovery, but they do not substitute cleanly.
Section 179 in 2026 (projected): Limit ~$1,315,000 (up from $1.25M in 2025, indexed), phase-out begins at ~$3,330,000 of total 179/bonus property placed in service that year (2025: $3.13M). Costs up to the limit are expensed dollar-for-dollar against net active trade-or-business income — 179 cannot create a business loss (carryforward to next year where income is insufficient), cannot exceed taxable income from the active trade or business, and is elected asset-by-asset with recapture if business use drops to ≤50% or if the asset is converted to personal use.
Bonus in 2026: No taxable-income limit — can create or increase a net operating loss. No election needed (it applies automatically unless you opt out by class) and no business-use recapture at 50% (bonus recapture is narrower than 179 recapture). Bonus is class-by-class: you elect out for all 5-year property placed in service that year, not for one machine, whereas 179 can be applied selectively — $30,000 of 179 on the router and bonus on the rest.
When 179 wins on an $80K buy even at 100% bonus:
- Profit before the purchase is only $45,000 and you have no other income to absorb an NOL — bonus at 100% would create a $35,000 NOL carried forward; 179 creates a $45,000 Year 1 deduction capped at income, with the remaining $35,000 carried forward as 179 — economically similar, but 179 lets you pick the $45K precisely and leave basis for bonus/regular MACRS next year where state bonuses diverge.
- You have taxable-income-limited state 179 but no state bonus — using federal 179 while the state takes its own 179 gives a federal/state book match; using federal bonus leaves a state addback and a multi-year state/federal basis difference to track for every future disposition.
- The asset is ineligible for bonus (certain land improvements, used property that fails the purchase requirements where the prior owner was related) but eligible for 179 — 179 fills the gap bonus cannot.
When bonus wins:
- Profit before the purchase is already a loss and you want the NOL — bonus creates it without election; 179 is capped and the excess waits.
- You bought three machines in the same 5-year class and want one rate for the class — bonus's class-level simplicity vs. 179's asset-by-asset picking becomes an advantage at volume.
- The asset is bonus-eligible but above the owner's active income and the carryforward economics of an NOL outweigh the 179 limitation — particularly for a passthrough where the owner's other trade-or-business income is low.
Many owners in the 40% era simply use 179 for the first $80K on a single $80K asset and ignore bonus — three lines on Form 4562 Part I instead of a 40/60 split. That is rational pricing of administrative attention, not tax-optimization, and it is permissible strategy.
The $80K Router — Three Year 1 Answers on the Same Invoice
Assume $80,000 5-year router, placed March 15, 2026, no prior 179 usage, sufficient trade-or-business income to absorb any 179, half-year convention.
| Election | Year 1 | Carried basis / Year 2+ | Notes |
|---|---|---|---|
| A. Current law, no 179, take 40% bonus | $41,600 (32,000 bonus + 9,600 MACRS) | $38,400 MACRS over Years 2–6 | Default if you do nothing; bonus is automatic |
| B. Current law, 179 to max Year 1 | $80,000 ($80k 179) | $0 | Needs taxable income ≥$80k; asset-by-asset election, recapture at ≤50% business use |
| C. Retroactive 100% (if signed, same asset) | $80,000 ($80k bonus) | $0 | Requires retroactive amendment for prior-year buys; do not file on this basis until law signs |
The $38,400 spread between A and B/C is not abstract — at a 24% marginal rate it is ~$9,200 of federal tax timing plus QBI effects (QBI deduction is computed after 199A wage/UBIA mechanics but before business-income-limited 179; bonus and 179 both reduce QBI). Where the loan was underwritten at $80K of Year 1 deduction, case A produces a material cash-flow forecast miss the borrower must explain before the covenant is tested.
Coordination trap — Section 174: If the $80K machine includes custom software or development costs that are specified research expenditures under §174, the software/customization component may be amortized over 5 years (15 foreign), not eligible for 179/bonus at all. A $35,000 software-customization add-on to the router is not bonus property at the same 40% — it is §174 property. Disaggregate the invoice.
The Ledger That Survives a Retroactive Change
The 40/60 assets bought before OBBBA signs will need two sets of eyes if the law retroacts — the state that never conformed and the federal amended return — and the ledger that tracks basis by set is the one that files cleanly.
At purchase — tag basis by recovery path:
- Invoice dated, placed-in-service date (the tax event, not the order date — a machine ordered in November 2025 placed in service February 2026 is a 2026 asset at 40%, not a 2025 60% asset), class life (5-year vs. 7-year — cost-seg reclass at 5/7/15 matters), and whether bonus eligible, 179 eligible, or §174.
- Election log: §179 elected amount and asset list (deemed made on a timely return including extensions; late 179 relief via amended return under Reg. §1.179-2(c) for the year), §168(k)(7) bonus opt-out by class (if you consciously opt out), and QIP vs. bonus-eligible QIP where improvements are involved.
Each year — keep federal/state basis separate where the state decouples:
- California and similar no-bonus states: maintain two depreciation schedules per asset — federal at bonus/179 and state at MACRS only — and reconcile the cumulative difference. The state difference reverses only on disposition; a federal 100% asset still has full state basis to depreciate, and a retroactive federal 100% widens the gap already on file.
If retroactivity signs — amend by the book:
- File Form 3115 vs. amended: Cost recovery changes are often automatic accounting method changes filed on Form 3115 with a §481(a) adjustment rather than amended — but an outright statutory rate change retroactive to the prior year is generally reflected on an amended return, not a 3115. Do not 3115 a retroactive bonus rate change without coordinating with the preparer — the method-vs.-amendment decision determines where the catch-up deduction appears and whether the NOL is generated in the right year.
- Five-year view: Before amending for the retroactive $48k pickup, model five years of taxable income, QBI, Section 179 carryforwards, NOL §461(l) excess business-loss limits, and state addbacks — pulling $48k into a prior year can generate a 2025 NOL that becomes a 2026 carryforward limited by excess business loss, rather than immediate cash.
The Bookkeeping Connection
Bonus depreciation rewards the habit that makes plain-text accounting powerful: every invoice is a dated, class-tagged, election-linked event — not a year-end total called "equipment." When placed-in-service date, class life, 179 election by asset, bonus opt-out by class, and federal vs. state basis live in the same version-controlled ledger that holds the 4562 workpapers and the §174 schedule where applicable, the story from "$80k router, 5-year, placed 03-15-2026, 40% current law, $32k bonus + $9.6k MACRS vs. $80k 179, state addback $38.4k" to "4562 Part I 179 $80k elected vs. Part II 40% bonus, state schedule at MACRS, amended return filed if OBBBA retroacts with §481 analysis" is traceable and explainable to a lender who underwrote Year 1 cash and to an examiner who will ask for the placed-in-service date before the percentage.
Simplify Your Financial Management
The rate is 40% until a signature makes it 100% — model 40, elect 179 where the rate is what moves the decision, and paper the placed-in-service date so the retroactive win, if it comes, amends the right year instead of becoming a method-change maze. Beancount.io gives you plain-text, version-controlled accounting where asset class, placed-in-service date, 179/bonus elections by asset and by class, and federal/state basis stay explicitly linked — no hidden schedules, no vendor lock-in, and AI-ready when you want help turning next quarter's capex plan into the pro forma that doesn't depend on a bill signing. Get started for free and keep the 40 you can file and the 100 you can hope as two numbers that don't get mistaken for each other.