How they differ
Bonus depreciation applies automatically to qualifying assets with a recovery period of 20 years or less and can create or increase a loss. Section 179 is an election, has an annual dollar cap, and cannot create a loss — it is limited to your business taxable income.
What real estate qualifies
Both can apply to short-life assets identified in a cost segregation study — appliances, carpet, land improvements. Section 179 was expanded to cover certain nonresidential improvements like roofs, HVAC, and security systems, which bonus depreciation may not reach for residential rentals.
Which to use
Many investors use bonus depreciation for the bulk of cost-segregated assets because it can generate a loss, then apply Section 179 selectively to items bonus does not cover. Because Section 179 is income-limited and subject to state conformity differences, model both before filing.
Frequently asked questions
Can Section 179 create a loss?
No. It is capped at your business taxable income. Bonus depreciation can create or deepen a loss.
Does bonus depreciation cover a new roof on a rental?
Often not for residential rentals, since roofs are long-life. Section 179 can reach certain nonresidential building improvements.
Do states follow these rules?
Not always. Many states decouple from federal bonus depreciation and Section 179 limits, so check state conformity.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.