Buying Equipment Before December 31: The Massachusetts Split

Two things are true about buying equipment before the year closes, and most year-end advice only tells you the first one.

Federally, the write-off is as good as it has been: Section 179 expensing up to $2,560,000 for tax years beginning in 2026, with the phase-out starting at $4,090,000 (Rev. Proc. 2025-32 § 4.24), and 100% bonus depreciation made permanent for qualified property acquired after 19 January 2025.

Massachusetts adopted none of it. In its conformity table for the federal act, the Department of Revenue answers “No” to full expensing for business property — for the personal income tax under c. 62 and for the corporate excise under c. 63 (TIR 26-4, retrieved 2026-10-15).

So the walk-in cooler you buy in December produces a large federal deduction this year and a much smaller Massachusetts one, spread over the asset’s life. One purchase, two schedules, two numbers.

Key Takeaways

• Federal Section 179 for 2026: $2,560,000 cap, phase-out from $4,090,000. 100% bonus depreciation is permanent.
• Massachusetts declined full expensing — “No” for both c. 62 and c. 63 in TIR 26-4.
• The same purchase therefore carries two depreciation schedules, and your state taxable income will not match your federal.
• Placed in service, not paid for. Equipment ordered in December and installed in February is a next-year deduction.
• Section 179 cannot create a loss; bonus depreciation can. Which one helps depends on the year you are having.

What Massachusetts did and did not adopt

The conformity table is worth keeping, because the pattern is not “Massachusetts says no to everything” — it is a provision-by-provision set of choices:

Two of those are adopted, with dates. Four are not. Equipment expensing sits firmly in the second group, and it is the one with the largest cash consequence for a restaurant, salon or trade business making a year-end purchase.

The tips and overtime rows are the subject of a separate note, because they land on your staff rather than on your equipment budget.

Placed in service is the date that counts

The federal deduction attaches to the year the asset is placed in service — ready and available for its intended use — not the year you paid for it or signed the order.

This is the practical year-end trap. A convection oven ordered on 20 December, delivered on 8 January and commissioned on 15 January is a 2027 deduction, whatever the invoice date says. If the purchase is being made for this year’s tax position, the installation has to happen this year too, and in late December installers are the constraint rather than suppliers.

The caption is the important part of that chart. Almost nobody reading this is near $2.56 million of equipment. The limit that actually binds a small business is a different one: Section 179 cannot create a loss. It is capped at your taxable income from the business. Bonus depreciation has no such restriction and can push you into a loss.

Which of the two is better therefore depends on the year you are having, not on which sounds more generous. A profitable year can use either. A thin year may find Section 179 blocked and bonus depreciation useful — or may find that a deduction this year is worth less than the same deduction next year.

What the split means in practice

Three consequences of Massachusetts not following:

Your two returns will disagree, by design. A large federal deduction and a small state one is the correct outcome, not a bookkeeping error, and the difference persists for years as the state schedule runs its course.

The cash benefit is smaller than the federal number suggests. If you are modelling a purchase on the strength of “we can write the whole thing off,” the Massachusetts column is still taxing income the federal column treats as spent.

Someone has to keep the second schedule. The state basis of each asset diverges from the federal basis the moment you take the federal deduction, and it stays diverged until disposal — at which point the gain calculation differs too. That is a record to maintain, not a one-time adjustment.

Before you sign in December

1. Confirm the install date, in writing. Placed in service is the test, and December installers book up.
2. Ask what the purchase does to your taxable income before deciding between Section 179 and bonus depreciation.
3. Budget on the Massachusetts number as well. The state does not share the federal enthusiasm for your new equipment.
4. Make sure the fixed asset register carries both bases. Federal and Massachusetts, from day one — reconstructing it later is the expensive version.
5. Do not let the deduction decide the purchase. A write-off is a discount on something you needed, not a reason to need it.

Keeping two bases per asset is ordinary bookkeeping work if it is set up at acquisition, and a reconstruction project if it is not.

How this was checked

The Section 179 cap and phase-out are from Revenue Procedure 2025-32 § 4.24, published in Internal Revenue Bulletin 2025-45. The Massachusetts positions are from the conformity table in DOR TIR 26-4, read directly rather than from a summary of it — the “in part” and “from 2027” entries in that table are the reason a blanket statement about Massachusetts conformity would be wrong.

No dollar example of a Massachusetts first-year deduction appears above. That figure depends on the asset class, the recovery period and the method, and inventing a representative number would make the article more concrete and less true.

Green Books Inc. is a bookkeeping practice — Certified Bookkeeper (CPB), IRS Authorized e-File Agent, and Notary Public. This is general information about published rules, not tax advice. Depreciation elections interact with your whole return and are worth deciding with the preparer who will file it.

Frequently asked questions

Does Massachusetts allow Section 179 at all?

Massachusetts has its own treatment of depreciation and it is not the federal one after the recent changes; TIR 26-4 records that the state did not adopt the federal full expensing provision. The practical planning point is that you cannot assume the federal deduction carries across, and the state calculation is separate.

We lease our equipment. Does any of this apply?

It depends on whether the lease is treated as a purchase for tax purposes, which turns on the terms rather than on what the agreement is called. A true operating lease is a deductible expense rather than a depreciable asset, which sidesteps the whole question — worth confirming before year end rather than after.

Is it worth buying in December just for the deduction?

Only if you were going to buy it anyway. A deduction returns a fraction of the money spent, so a purchase made purely for the write-off leaves you poorer with better equipment. The timing question is worth optimising; the purchase decision is not.

What if we buy used equipment?

Both Section 179 and bonus depreciation can apply to used property provided it is new to you and acquired from an unrelated party. The Massachusetts position is the same either way, because the state did not adopt the federal provision for new or used.

The deduction is real, just not everywhere

The federal treatment of equipment is genuinely generous and genuinely permanent now. The thing to carry into a December purchase decision is that Massachusetts is a separate calculation producing a separate, smaller number in the same year.

If you have equipment in the plan before year end and want both columns modelled before you sign, book a consultation.