Equipment write-offs: de minimis, Section 179 and bonus depreciation
Federally, most traders can write off equipment in the year they buy it. Small items can often be expensed under the de minimis safe harbor, and larger ones through Section 179 or 100% bonus depreciation. Your state may not follow these rules, so your state return can show a smaller deduction than your federal one.
First: is your trading a business?
Everything below assumes your trading is a business, for example because you receive prop firm payouts reported on Form 1099-NEC and file Schedule C, or you trade through an LLC or corporation. Whether it's a business depends on your facts, and that's a question for your tax professional.
Three ways to write off equipment
| METHOD | HOW IT WORKS | GOOD FOR |
|---|---|---|
| De minimis safe harbor | An annual election that lets you expense items costing $2,500 or less per invoice or item, if you have accounting procedures in place. | Monitors, keyboards, small hardware |
| Section 179 | Elect to expense qualifying equipment in the year it's placed in service, up to $2.5 million from 2025, phasing out once purchases pass $4 million. Generally limited to your business income. | Computers and larger purchases |
| Bonus depreciation | 100% first-year deduction, made permanent for property acquired and placed in service after January 19, 2025. Not limited to business income. | Larger purchases, or years with low income |
| Regular depreciation (MACRS) | The cost is spread over the asset's recovery period. Computers are generally 5-year property. | When you'd rather spread the deduction |
A worked example
You buy a $3,200 trading computer in March 2026, used only for your trading business. It's over the $2,500 de minimis limit, so federally you could elect Section 179 or use 100% bonus depreciation and deduct the full $3,200 on your 2026 federal return, or spread it using regular depreciation.
In most states the result is the same. In California, bonus depreciation isn't allowed, but the purchase fits within California's $25,000 Section 179 cap, so electing Section 179 can keep the two returns aligned. That's why the order you choose matters, and why it's worth asking your tax professional before you file.
States that do things differently
- California doesn't allow federal bonus depreciation and caps Section 179 at $25,000, phasing out once purchases pass $200,000.
- New York State and New York City don't follow federal bonus depreciation.
- Many other states adjust these rules too. Use the state picker and check your state's instructions.
Things that change the number
- Personal use. If you also use the equipment personally, generally only the business share counts, and some methods require more than 50% business use.
- Selling it later. If you sell equipment you fully expensed, part of the sale price can become taxable income.
- Entities. If your LLC or corporation buys the equipment, the deduction follows the entity's return.
What to keep
Keep the receipt, the date you started using the equipment for your business, and a note of any personal use. Keep equipment records for as long as you own it, plus the years after you sell it until the period for that return closes.
Drop the receipt into the Ledger. Pivotext stores it with the entry and flags larger purchases for your tax professional as "may be equipment". It doesn't choose the method or calculate your deduction. Join the beta
Official sources
Pivotext guides are general information about how US federal and state tax rules commonly apply to traders. They are not tax, accounting or legal advice, and they may not fit your situation. Rules change, sometimes every year. Confirm anything you rely on with a qualified tax professional such as a CPA or enrolled agent.