Section 179 and Bonus Depreciation: What Changed, and What South Carolina Does Not Follow

These are the figures for tax years beginning in 2026. Both limits are indexed and the rules underneath them were rewritten recently, so this is one of the areas where a two-year-old article is actively misleading rather than merely stale.

What each one does

Choosing between them

With both at effectively full expensing, the difference is no longer about how much. It is about three things.

• Section 179 is limited to taxable income from the active conduct of a trade or business. It cannot create or increase a loss; the excess carries forward. Bonus depreciation has no such limit and can create a net operating loss.
• Section 179 lets you pick individual assets and partial amounts. Bonus is all-or-nothing within a class.
• State treatment differs, and in South Carolina it differs a great deal.

A profitable business that wants the deduction now and no loss usually reaches for Section 179. A business deliberately generating a loss — to carry forward, or against other income where the rules permit — needs bonus. A business that wants a large federal deduction and a manageable state return needs to look at the third point before deciding.

The South Carolina addback

South Carolina does not recognize the bonus depreciation allowed by IRC Section 168(k). In the year the property is placed in service, the difference between the federal depreciation deduction and what the deduction would have been without bonus is added back on the South Carolina return.

Three consequences follow, and only the first is obvious:

• The state deduction in year one is far smaller than the federal one. A 100% federal write-off is not a 100% South Carolina write-off.
• Your South Carolina adjusted basis in the asset is higher than your federal basis, and stays that way. Two sets of depreciation schedules, for as long as you own it.
• The deduction is not lost. Additional depreciation is available for South Carolina purposes across the remaining years of the asset's life. It is timing, not disallowance — but it is timing that runs for the whole recovery period.

Section 179 has historically been treated more favorably by South Carolina than bonus depreciation, which is a further reason the choice between them is a state question as much as a federal one. And a caution specific to this year: H. 4216 rewrote the South Carolina individual income tax for 2026, decoupling the state from federal deductions and making federal adjusted gross income the starting point, and the SCDOR has said further guidance is coming. Confirm the current mechanics for 2026 rather than relying on how the addback was reported on an earlier form.

The rules that trip people

The point that gets lost in December

A deduction returns your marginal rate. Spending $60,000 on equipment you did not need in order to avoid tax converts $60,000 of cash into an asset plus somewhere between $15,000 and $25,000 of tax saved. If the equipment earns its keep, expensing is a genuine cash flow advantage worth timing carefully. If it does not, the tax tail has wagged a fairly large dog.

The useful version of this conversation happens before the purchase, and it starts with whether the business needs the asset. The election is the easy part.