100% Bonus Depreciation Is Back, and This Time It's Permanent

If you were planning equipment purchases around a shrinking deduction, you can stop.

Under the prior rules, bonus depreciation was phasing out on a set schedule — 60% in 2024, 40% in 2025, 20% in 2026, and gone in 2027. Businesses were racing the calendar, pulling purchases forward to capture a deduction that got smaller every year.

The One Big Beautiful Bill Act ended that. Bonus depreciation is restored to 100% and made permanent, for qualified new and used property acquired and placed in service after January 19, 2025.

What 100% bonus depreciation means in practice

Normally, when you buy a business asset with a useful life of several years, you deduct the cost over those years through depreciation. A $60,000 piece of equipment might be deducted at roughly $12,000 a year for five years.

Bonus depreciation lets you deduct the entire cost in the year you place the asset in service. That same $60,000 becomes a $60,000 deduction this year instead of $12,000.

The total deduction over the life of the asset is the same either way. What changes is timing, and timing is cash. Getting the full deduction now rather than spread across five years means a smaller tax bill this year and more cash available to run the business.

Qualifying property generally includes machinery and equipment, computers and technology, furniture and fixtures, vehicles subject to their own separate limits, and certain improvements to non-residential buildings. Importantly, used property qualifies as long as it is new to you and not acquired from a related party.

The new manufacturing provision

There is a second piece worth flagging for anyone in production. The law created a 100% deduction for the cost of qualified production property — broadly, non-residential real property used in manufacturing — placed in service after July 4, 2025 and before 2031, where construction began after January 19, 2025 and before 2029.

Real property has historically been depreciated over 39 years. A full immediate deduction on a production facility is a substantial change in the economics of building or expanding one. If you are contemplating a facility project, the rules around what qualifies are specific and worth reviewing before you commit.

How this changes buying decisions

Permanence is the part that actually matters for planning.

The rush is over. When the deduction was shrinking every year, the tax-smart move was to buy sooner even if the business reason was thin. That pressure is gone. You can buy equipment when the business needs equipment.

But timing within a year still matters. The deduction applies in the year the asset is placed in service, not the year you order it or pay for it. Equipment delivered on December 28 and put to use gives you the deduction this year. The same equipment sitting in a crate on January 3 does not.

Big deductions can create their own problems. A large bonus depreciation deduction can push taxable income low enough to waste other tax benefits, reduce your QBI deduction, or create a loss you can't fully use this year. Deducting everything immediately is not always the best answer, and you can elect out of bonus depreciation by asset class if a slower deduction serves you better.

State treatment varies. A number of states do not follow federal bonus depreciation rules. Your federal and state depreciation schedules may diverge, which means the state tax picture can look quite different from the federal one.

Bonus depreciation versus Section 179

These two provisions overlap and people often confuse them. Both allow immediate expensing. The practical differences:

Section 179 has a dollar cap and phases out once total equipment purchases exceed a threshold. Bonus depreciation has no cap. Section 179 can't create or increase a net operating loss — it's limited to your business income. Bonus depreciation can create a loss. Section 179 is elected asset by asset, giving you finer control.

Most businesses end up using both, applying Section 179 first to specific assets where it's advantageous, then bonus depreciation on the rest.

A note on recordkeeping

Immediate expensing does not eliminate the need for a fixed asset register. You still need to track what you own, what it cost, when it was placed in service, and how it was expensed — because when you sell or dispose of an asset that was fully deducted, the gain is generally recaptured as ordinary income. Businesses that expense everything and then stop tracking assets are setting up an unpleasant surprise at sale.

This article is general information, not tax advice for your specific situation. Tax rules change and apply differently depending on facts we may not know about your business. Please talk with us before acting on anything here.