Section 179, Bonus, Then MACRS: How Do You Keep Depreciation Straight?
Treat depreciation as a waterfall. Apply the applicable immediate-expensing rules, then bonus depreciation, then regular MACRS to the remaining basis.
Step 1: depreciable basis
Start with the property's appropriate tax basis and identify whether any immediate-expensing elections or special depreciation provisions apply.
Step 2: Section 179
Section 179 can allow qualifying property to be expensed subject to annual limits, phaseouts, taxable income limitations, eligibility rules, and business-use requirements. Use current-year CPA materials for testable dollar amounts.
Step 3: bonus depreciation
After Section 179 where applicable, determine whether remaining qualifying basis is eligible for bonus depreciation under the law applicable to the tested year. Do not memorize an old percentage from a prior year.
Step 4: regular MACRS
Apply regular MACRS to the remaining depreciable basis using the correct recovery period, method, convention, and placed-in-service facts.
Basis keeps shrinking
Original depreciable basis − Section 179 − applicable bonus depreciation = basis remaining for regular MACRS.
Conventions
Half-year, mid-quarter, and mid-month conventions can appear. Identify the property type and facts before selecting one.
The takeaway
Depreciation is a sequence, not three separate deductions applied to the full original basis.
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FAQ
Should I memorize current Section 179 limits?
Use current CPA materials because dollar thresholds can change.
Is bonus depreciation always 100%?
No. Use the law applicable to the tested year.
Does MACRS apply to original basis after Section 179?
Regular MACRS generally applies to the remaining depreciable basis after applicable prior reductions.