How Can Your Business Pay Less in Taxes in 2026 With 100% Bonus Depreciation?
Qualifying capital purchases, including computers, servers, and networking equipment, may be eligible for a full first-year depreciation deduction. Here is what business owners should know.
For 2026, businesses can potentially deduct 100% of the cost of qualifying capital equipment from federal taxable income in the year the equipment is placed in service. Many common technology purchases, including workstations, servers, and networking equipment, fall into eligible categories. A business investing $60,000 in qualifying IT equipment could potentially deduct the full $60,000 in 2026 instead of spreading the deduction over several years. The actual tax benefit depends on the business’s circumstances. The IRS explains the restored allowance in its 2026 guidance.
That does not make the equipment free, and bonus depreciation is not a tax credit. It accelerates a deduction that otherwise could be spread over multiple years. For companies already considering a significant equipment investment, however, that timing can affect near-term cash flow.
For many small and mid-sized businesses, replacing aging technology is something that keeps getting pushed down the priority list. Computers still turn on, servers are still running, and the network seems to do its job. Until something fails, performance becomes a problem, or an aging system can no longer be adequately secured. The 2026 depreciation rules give owners another financial consideration when deciding whether to replace equipment now or keep putting it off.
What Is 100% Bonus Depreciation?
Normally, when a business purchases equipment expected to last several years, the IRS requires the cost to be depreciated over time. Computers and related equipment, for example, are commonly depreciated over five years.
Federal legislation enacted in 2025 restored a 100% additional first-year depreciation allowance for certain qualifying property acquired after January 19, 2025. For eligible purchases placed in service during a business’s 2026 tax year, the full depreciable cost can generally be deducted immediately. IRS Publication 946 details the eligibility rules, exceptions, and elections.
The rule generally covers qualifying tangible business property with a recovery period of 20 years or less and certain purchased computer software. The deduction reduces taxable income, not taxes dollar for dollar. Its value depends on the company’s income, ownership structure, and the tax rules that apply to it.
What Business Equipment Qualifies?
The opportunity goes well beyond IT. Many types of qualifying business machinery, office equipment, furniture, and other capital assets may be eligible. For a company planning a technology refresh, potentially qualifying purchases include:
- Desktop computers, laptops, and workstations
- Physical servers and storage systems
- Network switches, routers, and wireless access points
- Firewalls and dedicated security appliances
- Backup hardware and uninterruptible power supplies
- Certain purchased computer software
Both new equipment and certain used equipment can qualify. But not every technology expense is an eligible capital purchase. Monthly Microsoft 365 subscriptions, cloud hosting, cybersecurity subscriptions, and managed IT service agreements are generally not depreciable equipment purchases. They may still be deductible as ordinary business expenses under separate rules.
Equipment acquired through a true lease is generally depreciated by its owner, not the customer renting it. A financed purchase may still qualify when the business owns the equipment. Building improvements and installed cabling can require a closer look at asset classification, so it is worth confirming how each part of a project should be treated.
What Could a $60,000 IT Refresh Mean for Your Business?
Consider a 30-employee company that has been postponing a technology refresh. Several workstations are six or seven years old, employees are waiting on slow computers, and parts of the network are nearing the end of their supported life. The company decides to invest in updated equipment.
| Equipment | Investment |
|---|---|
| 30 new workstations | $45,000 |
| Network and security equipment | $15,000 |
| Total investment | $60,000 |
Assuming the purchases qualify, the company may be able to claim a $60,000 federal depreciation deduction in 2026. At an illustrative 24% marginal federal income tax rate, that could represent about $14,400 in current-year federal income tax savings if the entire deduction can be used. The example is illustrative, not an estimate for every type of business. A C corporation, for example, has a different federal tax rate.
The company still spends $60,000, and the $14,400 is not an additional lifetime deduction. Bonus depreciation primarily changes when the deduction is taken. But receiving that benefit sooner may improve cash flow while the company also gains more reliable equipment, better performance, and a supported infrastructure.
What Rules Matter for a 2026 Deduction?
The most important practical requirement is that qualifying equipment must be placed in service during the tax year. That generally means it is ready and available for its intended business use. Ordering computers in December and leaving them boxed until January may not produce a 2026 deduction.
For a calendar-year business targeting a 2026 deduction, equipment generally must be ready and available for business use by December 31, 2026. That date is a deadline for claiming a deduction in the 2026 tax year, not a claim that the federal provision expires on December 31.
The property must also meet the acquisition and eligibility requirements and be used for business purposes. The restored 100% federal allowance generally applies to qualifying property acquired after January 19, 2025. Financing alone does not disqualify a purchase when the business owns the asset, although a lease can receive different treatment.
State rules can be different. Arizona, for example, uses different depreciation calculations for individual filers and C corporations. An Arizona business should have its accountant evaluate the state impact separately rather than assuming a federal deduction produces an identical state deduction. See the state’s individual and corporate adjustment statutes.
How Is Bonus Depreciation Different From Section 179?
Section 179 is another provision that lets businesses immediately expense qualifying equipment. For 2026, its maximum federal deduction is $2.56 million and begins phasing out when qualifying purchases exceed $4.09 million. Unlike bonus depreciation, Section 179 is also subject to a business-income limitation. Those amounts are published in the IRS 2026 inflation adjustments.
For many small businesses making routine IT purchases, either provision may produce an immediate deduction. The same cost cannot be deducted twice, and choosing between the two depends on the taxpayer’s situation. That is a decision to make with a qualified tax advisor.
A Tax Deduction Is Not a Reason to Buy Equipment You Do Not Need
There is no financial advantage to spending $60,000 simply to avoid paying tax on $60,000 of income. The business is still spending real money, and the deduction offsets only a portion of that cost.
The opportunity is for companies that already have a reason to invest. Maybe workstations are nearing the end of their useful lives, servers are approaching the end of warranty or vendor support, or old network equipment is creating security and reliability concerns. Those are business problems worth addressing regardless of the tax rules.
If the investment is already justified, accelerating the deduction can help the financial timing. Just remember that equipment selection, procurement, configuration, data migration, and deployment take time. A rushed project in late December is rarely the best way to modernize a business. Build the technology plan first, then coordinate the purchasing and deployment schedule with your accountant.
Frequently Asked Questions
Can a business deduct 100% of computer purchases in 2026?
Generally, yes, if the computers are qualifying property, meet the acquisition and business-use requirements, and are placed in service during the relevant 2026 tax year. The IRS rules and the company’s individual circumstances still apply.
Does equipment have to be paid for in full to qualify?
Not necessarily. Equipment that a business purchases through financing can still qualify when the company owns the asset and meets the other requirements. A true lease generally has different tax treatment.
Can used equipment qualify for 100% bonus depreciation?
Yes. Certain used equipment can qualify, but restrictions apply, including prior-use and related-party acquisition rules.
What if my business is not profitable in 2026?
Bonus depreciation can potentially create or increase a tax loss. Net operating loss rules, pass-through limitations, and other restrictions may affect when that loss produces a usable tax benefit.
Does this apply to cloud services and Microsoft 365 subscriptions?
Recurring SaaS subscriptions and cloud services are generally not depreciable equipment purchases, although they may be deductible as ordinary business expenses. Certain purchased software can qualify.
What should we do before the end of 2026?
Inventory hardware nearing the end of its useful or supported life, decide what actually needs replacing, develop a realistic deployment schedule, and have your tax advisor review the deduction before committing to a purchase.
Have a Technology Problem or Question You’d Like to Discuss?
If your organization is considering a workstation refresh, server replacement, or network modernization, Coeus Consulting can help evaluate technology requirements, build a realistic budget, and plan the deployment around business operations. Your tax advisor can help determine how the investment fits into your tax strategy.
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About Coeus Consulting
Coeus Consulting is a Phoenix-based managed IT services provider and MSSP serving small and mid-sized businesses across managed IT, cybersecurity, cloud, and compliance. We help organizations make practical technology decisions that improve resilience without losing sight of business reality.
About the Author
Linus Malefors
Managing Director, Coeus Consulting
Linus Malefors is an accredited technology consultant with over 30 years of experience serving Phoenix small and mid-sized businesses. He has supported more than 1,000 organizations throughout his career, and his leadership at Coeus Consulting has earned him two MSP Titans of the Industry finalist honors and a place among the 2026 AZ Champions of Change finalists. His technology expertise spans cybersecurity, cloud, AI, infrastructure, and regulatory compliance.
Sources referenced in this article:
- IRS: Guidance on 100% Bonus Depreciation (January 2026)
- IRS Publication 946: How to Depreciate Property
- IRS Topic 704: Depreciation
- IRS: 2026 Section 179 inflation-adjusted limits
- Arizona Revised Statutes §43-1022
- Arizona Revised Statutes §43-1121
- Arizona Revised Statutes §43-1122
This article provides general business information, not tax, legal, or accounting advice. Consult a qualified tax professional to determine how depreciation rules apply to your organization.