What is Bonus Depreciation?

On July 4, 2025, the One Big Beautiful Bill Act was signed into law, and with it comes the return of 100% bonus depreciation, which is now made permanent.

 

If new equipment, vehicles, or renovations are in your future, this may be the ideal time to act. With that said, I wanted to send a quick update on how this could translate into serious tax savings and more cash to reinvest in growing your business.

 

What Is Bonus Depreciation?

 

Bonus depreciation lets businesses immediately deduct the full cost of eligible business assets, such as equipment, furniture, computers, and certain building improvements, in the year they’re placed into service.

 

Instead of spreading depreciation over several years, you get the entire write-off upfront. That means lower taxes in the year of purchase and more working capital in your hands.

 

How Can This Affect Your Business?

 

Here’s how 100% bonus depreciation may impact your business:

• Potential Tax Savings - Deduct the full cost of qualifying purchases in the year they are placed in service.
• Cash Flow Considerations - Accelerating deductions may help retain more funds in the near term for reinvestment in operations, staffing, or expansion.
• Timing Flexibility - Make purchases when they best align with your operational needs and tax year strategy.
• Support for Business Investments - Use the provision to upgrade systems, renovate facilities, or expand your fleet without waiting years to recover the cost.

 

What Changed Under the OBBBA?

 

Here’s a quick summary of the new bonus depreciation rules:

• Starting January 20, 2025, you can deduct 100% of the cost of eligible assets placed in service. There’s no phase-out or sunset provisions.
• Elimination of the phase-down schedule
• Under the previous law, bonus depreciation was being reduced year by year. (It was 40% for property placed in service in 2025.) That's now been reversed; 100% is locked in going forward. Just remember, while this applies at the federal level, some states may not conform to this new provision.
• Qualifying assets include:
• Equipment and machinery with a useful life of 20 years or less
• Qualified improvement property 
• Computer software
• Certain business vehicles (check weight and use requirements)